BUSINESS MODELS FOR FILM PRODUCTION:

ONTARIO PRODUCER CONSTRAINTS AND OPPORTUNITIES

JAMES WARRACK

A THESIS SUBMITTED TO THE FACULTY OF GRADUATE STUDIES

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS

FOR THE DEGREE OF

MASTER OF ARTS

GRADUATE PROGAM IN INTERDISCIPLINARY STUDIES

YORK UNIVERSITY,

TORONTO, ONTARIO

January 2012

© James Warrack, 2012 Library and Archives Bibliotheque et Canada Archives Canada

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The combined disciplines of filmmaking, communication and culture, and economics provide a complex interrelationship for the investigation of the business of feature film in

Ontario. The complexities of the business aspects of the Canadian film industry are analyzed and explained from its beginnings in the early 1900s to the present day marketplace. The focus of this thesis is on the business models that dominate the film industry in Ontario and resulting constraints and opportunities for producers. The thesis combines interdisciplinary perspectives in a consideration of film as an artistic collaboration, a cultural product and an economic global industry.

ii Dedication

This is dedicated to the memory of Professor Peter Morris, film historian, writer and educator. Peter was a great inspiration to his students, collaborators and colleagues.

iii Acknowledgements

This thesis combines the disciplines involved in my course of study and research.

The three fields involved in my project, listed beside their respective representative from my supervisory committee, include: Film Studies, Professor John McCullough;

Communication and Culture, Professor Peter Morris; and Economics, Professor Kenneth

Carpenter. I have attempted to maintain a balance between the disciplines involved but have, out of necessity, devoted special attention to the film study component. Despite that, the interrelationship of the disciplines is of the utmost importance throughout the thesis.

iv Table of Contents

Preface 1

Introduction 3

Chapter 1 - The History of Feature Films in Ontario 13

Chapter 2 - Development and Funding 51

Chapter 3 - Legal and Business Aspects of Production 73

Chapter 4 - Global Economics, Distribution and Exhibition 94

Conclusion 119

Appendix A 127

Appendix B 129

Appendix C 131

References 132

Filmography 137 Preface

In this thesis I examine the business models of film production in Canada, and more specifically Ontario, in the context of historic, economic, political and cultural events in the film and television industries. To a significant extent, the film industry in

Canada developed as a branch plant to Hollywood studios and American television. This has provided Canada with a highly skilled work force of technicians and artisans, particularly in Ontario and British Columbia. These provinces host 60% or more of the service industry production used by American producers. Canadian film and television production has become a billion dollar industry creating an excess of 128,000 full-time equivalent jobs annually (CMPA 2011). The volume of production is up almost 9% over the previous year (CMPA 2011). A skilled workforce has also been the foundation for a growing indigenous Canadian independent production sector with a total volume of $2.39 billion for 2010/11 (CDMP 2011). With the complement of related creative industries in

the Toronto area, several film and television production companies are having success in domestic and global markets.

Following half a century of frustrating efforts to establish a feature film industry,

the 1960s and 70s finally saw Canadian producers able to commit to film production on a

full-time basis. In this period, producers began exploring a variety of funding sources,

such as co-production between the private and public sectors. Over time the industry has

evolved, driven by new technology that has resulted in new media, such as the hybrid

film-television production and, more recently, the new digital media. I examine the

© James Warrack, 2012 aspects of art and business that a producer must encounter in order to complete a motion picture. Questions arise regarding aspects of culture and economics that affect business models and I consider the opportunities and the constraints for independent film producers in Ontario. The tasks of the producer are chiefly financial and organizational.

He or she may be an "independent" producer, developing projects and pitching their ideas and productions to investors, distributors or broadcasters for financial support. They must prepare budgets, guide the project through the script development process, obtain ongoing financial support, arrange to hire the personnel and prepare and manage the daily scheduling and shooting of the film. After a film is completed, the producer continues to manage the production, taking on financial tasks such as monitoring the recoupment of and payment to investors, overseeing the marketing, and managing ongoing business and legal issues well after production is completed (Gasher 2002, 5).

Film production is both a cultural and economic phenomenon. Film is a collaborative art, but it is also a business connected to a global industry. To accommodate film's multifaceted nature, this thesis combines interdisciplinary perspectives. The film studies perspective involves the history of film production as well as an examination of the phases of production, all of which exists in the context of cultural and economic dynamics. The business studies perspective includes those aspects of law and business practice that effect filmmakers such as government policy and global economics.

2 Introduction

A high level perspective of a business model articulates how a business creates, delivers and captures value. That value may be economic, cultural or some other form of value. It may be helpful to discuss a business model as the way in which an entrepreneur delivers value to customers, attracts customers to pay for that value, and how that payment can sustain profit. Vivek Wadhwa, Senior Research Associate at Harvard Law

School explains that the discussion of a business model consists of the nuts and bolts of how a business generates revenue and profit.

There are two distinctly different business models operating in the Canadian film production industry. One of the two business models that dominate the industry is the foreign location and service industry (CMPA 2011). This international outsourcing or

"offshoring" is commonly referred to as service production or foreign location production in Canada (Davis and Kaye 2009). It is also referred to as "runaway film production",

produced by transnational Hollywood conglomerates or foreign independent production companies (Miller, Govil, McMurria, Maxwell and Wang 2005, 7). While these films may be shot anywhere in the world, Canada has become a favoured location in cities such as Vancouver, Toronto and Montreal (Elmer and Gasher 2005, 5). As Scott and Pope

note there are two substantive forms of the decentralization of Hollywood, the economic

runaway and the creative runaway (Scott and Pope 2007, 1365) and the two forms are

often simultaneously provided by an outsource location city such as Toronto. Between

1999-2004 during a very strong increase in dollars spent in film and television production

(CMPA 2011), the total firms in creative industries in Toronto increased by more the 50% 3 (OECD 2009, 35). The decentralization of Hollywood reflects the high cost of labour in

Hollywood. There are alternative equivalencies in terms of facilities in the outsource locations, and there are generous tax credits available (Scott and Pope 2007) adding greater incentive to decentralization.

A variety of companies and individuals provide foreign location and service production for feature film and episodic television. An advantage of this service production industry model is the relative immediacy of economic benefit. There is no

need for long-term investment from government funding agencies or other investors. The service production model also uses indigenous capabilities and thus there is a benefit for local artists, artisans, and technicians to gain experience and know-how (Davis and Kaye

2009). This can be an advantage in the international market for producers seeking locations with bargain prices but the assurance of capable crews. The disadvantage is that companies or individuals working in the foreign location and service industry do not have

the opportunity to learn the business strategies required to develop indigenous

independent productions. In addition, the creative control and ownership of the projects

remains with the transnational Hollywood studios or other foreign producers. Whether it

is a part of a major studio project or an American-Canadian co-venture most foreign

location production in Canada is foreign-controlled (Davis and Kaye 2009).

The second business model in the Canadian film and television production

landscape is the indigenous creative production. This business model of the industry is

distinguished from the foreign location and service industry because it is based on

copyright ownership and the potential exploitation of the properties created. This model 4 uses business strategies and creative capabilities to produce domestic cultural products

(Davis and Kaye 2009). While these firms compete for a smaller market share at home and globally, there are opportunities for international coproduction treaty projects and co- ventures with US partners to access the global market. Some indigenous production firms remain involved in the service industry as well as having developed their own independent productions. Serra Tinic notes in reference to global competition that

Canada is the second-largest exporter of television programming worldwide (Tinic 2005, viii).

The Canadian feature film industry is a minor player compared to the world- dominating U.S. major studios and U.S. independent films, both of which are distributed throughout Canada with little or no barriers. English Canadian feature films on average make up a mere 1.5 to 3% of screen time in Canadian cinema theatres. That translates into roughly two nights of screening per domestic film made, and those screenings only occur in a small number of markets. There were 76 theatrical indigenous feature films produced in Canada in 2010-2011, at a total volume of $306 million with an average budget of $4.1 million (CMPA 2011).

Any discussion of a business model for feature filmmakers in Ontario must include a clear idea of what is considered to be a Canadian film. Who and what might establish such a definition? The Canadian film has historically been defined primarily in either cultural or economic terms. There are various aspects of business practice to be examined and explained in the context of an indigenous business model for filmmakers

5 including legal issues of ownership, development and funding processes, as well as the distribution and exhibition practices for feature films.

The American model of movie making was energetically distributed throughout the world, and there was also an appetite for the style of storytelling, as well as the glamour and larger-than-life star system that the American major studios developed.

Several questions arise from a survey of Canadian film production and the dominance of the U.S. major studio production and distribution. There is certainly resistance to this dominance, but the question remains: is this resistance founded on economic or cultural grounds? The chapter included here on the history of film production in Ontario illustrates that there was a resistance to the economic domination of

American distribution cartels, as well as to the American cultural influence on Canadian society which held a bias toward British culture.

Was there a will to build a film industry in Canada? Again, the chapter on the history of film production in Ontario indicates that there have been varying degrees of enthusiasm for an indigenous film industry. But a young country like Canada, without the same historical depth and tradition in the creative industries that is found in Europe or the U.S., struggled in the face of the sheer volume and depth of the foreign control that was permitted by the Canadian and Ontario governments.

The growing pains of the industry as it exists today included the development of creative industries through the creation and contribution of the National Film Board, the

Canada Council and the Canadian Broadcasting Corporation, to mention only a few of the significant cultural institutions developed in the nation. Television played an extremely 6 important role in the efforts of those institutions and agencies to help establish domestic creative industries. Those efforts would eventually help feed a domestic feature film industry in which television itself played an important role. The demand for American television programming initiated the development of a skilled labour force as a result of

American film production in Canada. The artistic and technical skills eventually provides capabilities for independent domestic film production. Fifty years ago television was a

new medium, not unlike the Internet today, presenting new possibilities and new challenges for producers. Canadians were able to use those possibilities to help spark the

rise of a domestic film industry. Similar opportunities exist in today's environment.

Given the rapidly changing nature of this industry, it is important to ask: what are the

business models of the past and of the present, and what is likely for the immediate

future?

What Makes a Film "Canadian"?

The movie Juno (2007) is an Academy Award-nominated movie shot in

Vancouver by a Canadian-born director with a Canadian crew, and with two Canadians

among the lead actors. However, the film received no Genie Award nomination. The

$6.5 million comedy about a pregnant teen, played by the now widely known Canadian

actor Ellen Page, was one of the year's major box-office successes. The feature film was

produced without Canadian financial participation; it was financed in the United States by

Los Angeles-based Mandate Pictures and released by a U.S. studio, Fox Searchlight.

Because of the lack of Canadian funding, the film failed to meet the Genie Awards

standards of what qualifies as a "Canadian" feature film. In order to be eligible for the 7 Genie Awards, a film must be Canadian, as defined by CAVCO and the CRTC. Jason

Reitman, the Montreal-born director of Juno, complained that his film was not nominated for the Genie Awards, while the film Eastern Promises (2007), a co-production shot in

England with an international cast and directed by Canadian David Cronenberg, received

12 Genie nominations. A Hollywood Reporter story stated that Eastern Promises met the financing criteria because the Canadian co-producer, Toronto's Serendipity Point Films, raised 20 percent of the budget in Canada (Andrews 2008).

This example illustrates the difficulty involved in establishing what is and is not a

Canadian film. Even if a film is made in Canada, it does not necessarily qualify it as

Canadian. In fact, service industry production shot in Canada is likely for a movie-of-the- week (MOW), a U.S. television series, or a feature film that is produced by a U.S. studio.

Some of these productions are intended for television and some are feature films intended for worldwide distribution. Historically the Canadian film industry involved in service and support of foreign controlled productions is considered branch plant production, meaning film work that is bound for final assembly in a foreign studio.

An underlying motivation for the advancement of a Canadian film industry has too some extent always been business-related. While films have artistic and cultural merit they must also be distributed and exhibited, and this requires business strategies and financial transactions. History tells us that interested parties with clear economic motivations have lobbied the government to create policies providing tax credits or other business incentives to the industry. Despite this economic reality it is beyond a doubt that foreign cultural influence particularly from the U.S. is a defining characteristic of the 8 Canadian film industry. Still, the question remains: is this really a cultural issue, or an economic one? Beginning early in the 20th Century, the great concern over foreign influence was presented as if it were only economic in nature. In hindsight it appears that a great deal of the will to change the status quo was based on public exposure to

American ideals and culture, and a resistance to that exposure arose from a British cultural inclination. Similarly, resistance to American hegemony has been expressed in

Great Britain and other European countries that are concerned with the indoctrination of

American values via the silver screen. This has become somewhat less of a concern in

Canada in more recent times, as there has been great success for independent producers.

In particular, television programming has thrived, making strong statements of cultural identity (e.g., children's programming and comedy that is exported worldwide).

However, the film industry has not concerned itself as much with cultural identity.

This is not always the case, but what defines Canadian content in films does not concern typical Canadian tropes like Mounties, beavers or woodcutters in plaid jackets. Instead, the "Canadian" in Canadian film usually has more to do with the creative team, cast and crew of a film project. Cronenberg's Eastern Promises, for example, is set in London,

England and concerned with Russian mafia types. There is no Canadian reference in the entire film. There are many other examples of the absence of Canadian content (or any substantial amount of it) in the scripts of feature films that are, nonetheless, Canadian films. Thus, it is evident that the criteria establishing something as Canadian does not rely on the expression of Canadian identity or in the telling of Canadian stories. There have been Canadian novels and short stories that have been the inspiration for film, but 9 compared to the percentage of literary adaptations in the American film industry, it is a very, very small percentage.

What is a Film Producer?

The traditional Hollywood producer is an entrepreneur. Typically, the producer is not an artist but a businessperson. On the other hand, the Canadian business model has often followed a tradition of auteurism in which the writer/director leads a project. In this scenario, the writer/director has a project and is looking for a producer, someone to handle the business side of the equation. By contrast, the American model, and particularly the Hollywood or major studio model, is much more of a business enterprise approach. The producer or producers develop a property based on the marketability of works often already familiar to the potential audience. Of course, there are original scripts, but most major studio productions are adaptations of short stories, novels, novellas or newspaper or magazine stories. All filmmakers want creative control. Thus, auteurism is also a common basis for feature films in Canada because it is all about creative control of the script, the look and final edit. The Canadian writer/director filmmakers that exemplify the auteur approach have included Carl Bessai, Atom Egoyan, and David Cronenberg. Others include Patricia Rozema, Guy Madden, and John

Greyson, just to name a few. It must be noted that Canadian films have also included a number of successful adaptations, including the fairly recent success of Sarah Polley's

Away from Her (2006).

The responsibility for making a film rests primarily on the producers in the

Hollywood business model. Selecting the screenplay, principal stars, a director and production personnel is of paramount importance in packaging a film that is meant to satisfy the market demand. The producers are also responsible for arranging the financing required for the production of the film and overseeing all necessary marketing tasks to ensure that maximum revenues are earned through the exploitation of the film

(McQuillan 1980, 34).

The distinction between film as commercial entertainment and popular culture or

as art and high culture does little to change the fact that making a feature film is very

expensive. In Canada, independent films are the only type of projects that get produced.

Only established independent producers or production companies that have a track record

get an opportunity to make films with substantial budgets. There is no equivalent to the

major U.S. major studios in Canada that have the financial capabilities to take on huge

financial risk. While the films that do get made fit into the indigenous independent film

business model, they must fulfill the creative team criteria of CAVCO, funding sources

may make the films ineligible for some awards.

In order to understand such funding-related issues, I examine the investment

aspects of film production as a business practice, with a special consideration of the

private investor and issues of risk and recoupment. There is also a consideration of

financing by provincial and federal funding agencies, and other private funds. In the

global context, the international production headquarters appear to remain centralized,

with creative and financial management by multi-national conglomerates. The corporate

order of the American movie business has morphed from a structure of vertical

integration into one controlled by media moguls that are part self-supporting conglomerates. The once production-intensive Hollywood is now the headquarters for the financing and planning of global branch plant production, while the talented writers, directors, cinematographers, and composers involved in a film may originate from various part of the world. In Canada, Vancouver, Toronto, and Montreal are recognized centres of foreign location service production. Vancouver sustains a reputation for production quality in North America and Toronto is a recognized centre for post- production.

12 Chapter 1

History of Feature Films in Ontario

How and why has the past activities determined the current system of support for a feature film industry in Ontario? How has the industry evolved over the course of a century and more?

We must consider the significant influences of geographic and economic factors on the development, production, distribution and exhibition of Canadian motion pictures.

To put the Canadian film industry into perspective, it is necessary to examine our history and the influences of our unique political and cultural dynamics. We must also consider the role of particular policies that create and continue to affect our national support system. A historical survey of the production industry in Canada provides some understanding of the current support system including the very important institutional equity stakeholders.

Canadian cinema, as was the case in other countries, originated as a business venture exhibiting short filmstrips. In 1896, Vitascope screenings had audiences as large as 1600 people in Ottawa's West End Park. At the same time, double-bills were showing at Toronto's Robinson's Muse at a cost of 10 to 25 cents per ticket. Ontario had established the first Board of Censors in North America by 1911 and by 1913 a Theatres

Inspection Branch set the standards for theatre operation (Wise 2000, 1). This chronology of events and the significant players involved had their roots in a time in which, in Canada, "cinema" referred to exhibitions by traveling showman. These foundations remained intact through the decades as filmmaking spread out across the country until there was a concentrated focus of production in the creation of the National

Film Board of Canada (Morris 1978, 11-18). From the late 1890s, when the very first filmstrips were made, until 1914, the films that Canadians watched were 60% American and 40% British or French in origin (Ibid., 20).

Canada lost talent that might have helped establish and sustain a domestic film industry (Ibid., 28). As well, several films made by American companies made use of

Canadian content by way of picturesque Canadian locations or Canadian stories; two prominent examples of such are The Way of the Eskimo (1911) and Pierre of the North

(1914). Most early Canadian films were not intended for entertainment purposes but were designed and commissioned as publicity to encourage immigration to this country

(Ibid., 40)

The most pressing issues of the day concerning the development of a film industry were the needs for qualified craftsmen and of course sufficient return on investment from exhibition. A key and persistent issue was the fact that the Canadian domestic market was simply too small to support a domestic industry. The potential audiences were also too widely scattered across an expansive country for production to be viable without foreign release (Ibid., 46). The lack of centralized production facilities also hindered the development of artisans and craftsmen who would have serviced the industry. This was accompanied by the lack of a theatre tradition with trained writers, actors and technicians.

Attempts were made to establish a viable industry with significant contributors that included distributors and promoters. One such promoter was George Brownridge, who

built a studio complex in Trenton, Ontario. The studio was eventually sold to the Ontario 14 government to be used by the Motion Picture Bureau, a government film agency. Other entrepreneurs included Bruce Baimsfather, who was a cartoonist. Baimsfather ventured into feature films with Carry On, Sergeant! (1928). As was the case with similar attempts by other filmmakers, the film suffered from limited exhibition. This limit to exhibition proved to be the key constraint in the development of a Canadian film industry that was unable to develop a successful model for a self-sustained business entity with cultural relevance to Canadians.

Businessmen, such as the stock promoters Ernst Shipman, Harold Binney and J.

Arthur Nelson, explored a variety of financing models such as stock promotion or government investment. Several centres across Canada saw stock promoters seeking investment in feature films that were presented as an opportunity to turn a profit for investors. Some project promoters attracted private investment while others attempted to leverage government interest to produce films, build facilities, or encourage local employment (Morris 1978, 82-93). However, there turned out to be more nervousness than there was investor confidence. Ernst Shipman, for one, was increasingly aware of

American strategies to gain worldwide domination over the film industry. To counteract these trends, Shipman attempted to establish a business base in the United States by relocating to New York City. He also set up a distribution company in Toronto (Ibid.,

83). By 1922 the American companies had secured their dominance. By 1926,

American-made films represented 98.7 percent of the films imported to Canada.

Eventually, Hollywood interests succeeded in a business strategy aimed at displacing

15 local distribution and exhibition, thus securing the market and minimizing their risk

(Jarvie 1992, 41-42).

Foreign distribution around the world had fallen prey to the control of major

American studio interests. That meant that foreign sales went through certain key players who controlled the distribution to domestic and foreign exhibitors. American interests established this domination over distribution and exhibition by booking combines and forcing exhibitors to accept block booking, a practice in which an exhibitor was pressured to accept a package of films that often included potential moneymakers along with less desirable films. (For more details on this, see Chapter 4). This monopoly practice is still used today in the largest cinema chains across the U.S. and Canada. As a result of block booking, independent producers and distributors were squeezed out of the business. With no access to exhibition, and thus no means of recouping costs, independent producers could not sustain production.

Government involvement in film production began with sponsorships by the federal and provincial governments. Ontario created the Ontario Motion Picture Bureau

(OMPB) in 1917 and 1923, it took over control of the Trenton Studios. The OMPB's purpose was to advise the province and develop and distribute educational films for farmers, school children, factory workers and others. Actual production was contracted out to private companies that created and, in some cases, distributed the films (Wise

2000, 2). The federal government created the Exhibits and Publicity Bureau and the

Canadian Government Motion Picture Bureau (CGMPB) in 1918. The EPB's mandate was to promote Canada and to provide for educational interests. The CGMPB was 16 established in Ottawa and given its own studios and laboratories, an asset that made the board much more efficient than the EPB. However, the CGMPB was eventually phased out by 1941 following the creation of the National Film Board of Canada in 1939. (Morris

1978, 174 and 234)

Between 1914 and 1922, approximately 36 production companies were established, but few actually produced any films. The owners of these companies were optimistic for the business potential of these ventures and were eager to imitate the

American major studio success. However, the general view of Canadian investors at that time was that feature films presented an "unnecessary risk" (Magder 1993, 36). By 1923, the federal government's film bureau, under the direction of Ray Peck, had considerable success with the Seeing Canada tourism series that was distributed to several countries, including Britain, the United States, France, Belgium, Switzerland, Australia and New

Zealand. Circulation of the prints also included Japan, South America, China, Holland,

South Africa and Hawaii (Morris 1978, 159). But by 1925, feature film production in

Canada had come to a complete halt. Independent film producers at this time found it difficult to secure financial support. Adding to the financial constraints was the lack of opportunity for exhibition and the constraints imposed by U.S. dominance, which ensured that there would not be enough return on box office receipts to maintain future

production.

Canadian film production was faced with American hegemony. The U.S. major

studios produced the bulk of films, distributed or controlled their distribution and owned

or controlled the exhibition of their product. This was an ideal business model of vertical integration: it ensured a source of funding through monopoly practices in exhibition and distribution and guaranteed the flow of money that could be invested back into the

production of a new product. The concentration of the American film industry put control of the industry in the hands of a few key players, a trend exemplified in the creation of a cartel of American companies called the Motion Picture Producers and

Distributors of America (MPPDA). This was a powerful lobbying group that would

further protect the major studio interests. The Motion Picture Distribution and Exhibitors

of Canada (MPDEC), which was formed in 1924, was a mere offshoot of the

corresponding American organization and maintained control over screens across Canada.

The MPDEC acted as a business associate or subsidiary of the U.S. major studios.

The association between the American distributor Paramount and the Canadian

exhibitor Famous Players exemplifies the relationship between American distributors and

Canadian exhibitors. Paramount and Famous Players had an exclusive deal typical of a

trend that saw reciprocal relationships in which Canadian businesses benefited from their

allegiance to the American majors. The deal worked this way: the Canadian exhibitor got

the popular product, and the studio received a steady flow of cash to invest in more of the

same (Magder 1993,34-37). The interests being served were entirely business driven and

resulted in a blow to Canadian cultural influence and a boon to the spread of American

culture. Canada was not alone in adopting this business model, as many European

countries, including Britain, France, Germany and Italy, were similarly inundated with

American film products and American culture.

18 American film dominance did not go unchallenged. Britain responded with a quota system, introduced in the Cinematograph Films Act, in 1927. American interests were buying up British theatres at an alarming rate and threatening the fragile domestic film industry (Wise 2000, 3). The quota was designed to stem that tide. It began at 5 percent and increased each year. Eventually, the quota reached its peak and mandated that 20 percent of all films exhibited in Britain had to be made by British producers.

(Morris 1978, 180-181)

The British quota system encouraged British Commonwealth countries such as

Australia and Canada to distribute and exhibit in Britain. Unfortunately, instead of using this opening in the British market to promote Canadian films, opportunistic Canadians opted to leverage their allegiance to Hollywood studios (Magder 1993, 38-43). These made-in-Canada films became known as the infamous "quota quickies" (Morris 1978,

181).

This was the beginning of American "branch plant" film production, which occurred in Canada as well as other commonwealth countries, such as Australia. British

Columbia saw the creation of a number of production companies based in Victoria and

Vancouver. This corresponded to a dramatic increase in production from 1928 to 1938, in which time twenty-two feature films were produced for the British market. However,

'— the activity came to a halt when the British government changed their quota law and excluded Dominion productions. The change was largely in reaction to the Canadian producers that allowed Hollywood to subvert the original intent of the quota system

Morris 1978, 181). 19 In 1931, widespread support of a Canadian film quota system similar to that in

Britain prompted the British Film Quota Act. The new act specified that a portion of the films available for distribution to exhibitors in Canada were to be of British manufacture and origin. Because a commonwealth-made film was considered to be a British film, an

American film made in Canada could be considered a British film, and thus be distributed as such in Canada. This strategy was not effective in diminishing the monopoly of

American films because the critical aspects of distribution and exhibition remained in the control of a small cartel of American studios.

In July of 1930, when the American company Paramount attempted to take control of the Famous Players Canadian Corporation, a government investigation of the film industry found that a combine had existed since 1926 or earlier, and Famous Players was charged. All individuals or companies associated with Famous Players were accused of operating a monopoly of distribution and exhibition in Canada. The defendants were found not guilty of conspiracy and combination. No action was taken to establish a quota system as a result of the disclosures, nor were any additional restrictions imposed on

U.S.-controlled distribution and exhibition (Jarvie 1992, 25-41).

The major Hollywood studios were forced to end their cartel practice in the U.S. when independent American exhibitors complained to the American justice system. In the case of United States v. Paramount Pictures (1948), the United Sates Supreme Court backed by anti-combine legislation, ruled that block booking was illegal (Magder 1993,

66). While the Hollywood majors were forced to divest their cinema theatre ownership in the U.S., block booking and blind booking continued to be practiced in Canada. In recent years, the U.S. major studios have bought back into the exhibition side of the industry, in both the U.S. and Canada, thereby gaining increased control over distribution and exhibition as well as increased return on their production dollars, all using a completely different model of globally integrated corporate control.

The National Film Board (NFB) was created as the state funded film agency.

Under the guidance of John Grierson, a British filmmaker imported to advise on national film policy in 1938, the NFB gained recognition worldwide as a producer of documentary and information films. Grierson's idea of filmmaking ran absolutely counter to

Hollywood. He disapproved of using film solely for entertainment purposes and instead thought of film as a means to educate and inform the public (Magder 1993, 49-58).

Grierson was a champion of documentary filmmaking and the NFB remained world renowned for its documentaries well after he left the helm.

The Film Producers Association of Canada was founded by a group of major

Canadian production companies in 1946. Their interests, like the NFB's, were confined to information and adult education films. Most of these companies were not ready to venture into the risky business of feature films due to a lack of business strategy knowledge and a lack of financial backing for such ventures.

The Canadian government sought to end the flow of millions of dollars from

Canada to the U.S. major studios. They did this by encouraging a branch plant feature film industry while encouraging more distribution of Canadian shorts for exhibition in

U.S. cinemas. Canadian producers were eager to affiliate themselves with Hollywood- initiated productions and to participate in a branch plant approach to the creation of a 21 Canadian film industry. The initiative began during the late 1940s as the Canadian government sought to reverse a serious trade imbalance with the U.S. that resulted in large part from a steady flow of money south for consumer purchases. The plan involved import restrictions or quotas for American consumer goods, including feature film distribution and exhibition (Dorland 1998, 77-80. Fearing quotas, the MPAA's lobbying machine presented its own ideas meant to avoid any disruption to the very lucrative (for

Hollywood) status quo. The negotiations produced ideas for a compromise that included increased NFB film distribution in the U.S., more Canadian content in newsreels,

Canadian destinations in feature films, and the production of some American short films in Canada. The thrust of the MPAA's strategy was to appease the Canadian government with the promise of increased tourism from the U.S. (Magder 1993, 69-75)

The infamous Canadian Cooperation Project or CCP, as the MPAA solution came to be known is another example of compromise with US interests by the Canadian government. The CCP allowed the allies of the Hollywood studios to profit as Canada remained constrained as a part of the American domestic market. If the government of

Canada had indeed hoped for a branch plant industry, it simply did not happen. The

Canadian identity as potentially portrayed by film production was greatly influenced by the Massey Report of 1951. The report strongly supported the NFB and documentary filmmaking as opposed to commercial films of independent producers (Dorland 1998, 14-

16). Some of the Canadian producers wanted to see U.S. distribution of domestic

Canadian product. There was not a viable technical or craft-based talent pool experienced in feature film production as yet to establish the potential for a feature film industry. 22 Such potential was further degraded because the MPAA's "solution" to Canada's GNP balance woes with the U.S. did not include branch plant production in any significant way

(Dorland 1998, 77-80). The CCP lasted from 1948 to 1957; by 1956, remittance from

Canada to the U.S. majors reached $24 million. The reality was that Canadian films went from 4 to 10 percent of the domestic market between 1948 and 1951, while $18.5 million in remittances went south of the border into the American studio coffers (Magder 1993,

75).

The question is why would the government not use a quota and tariff system to encourage domestic production, as was the case in Britain and France? This is an important issue in Canadian film history because the government never instituted a quota system. The so-called "voluntary quota" never materialized in any significant way and even with government assistance to stimulate film production for television, Canadian feature film production suffered—as it still does—from very limited screen time in theatres. Another component of the CCP was a recommended 10% tax on box office receipts that would have added greatly to feature film funding (Gathercole 1984, 38). A similar tax model is practiced in France and has spawned a culturally relevant domestic film industry in that country. In Britain by 1956, remittances had reached $50 million to the US majors; however, $28 million was blocked for reinvestment in British production.

Whether or not Canada would have developed a vital domestic industry if they had adopted some of these policies is uncertain. However, the entrepreneurship of Canadians did create a branch plant industry or foreign location service industry that continues today. 23 The Massey Commission Report of 1951 was a government response to the increasing American cultural invasion and it produced some influential declarations and recommendations. The report did not agree with private producers who at that time claimed that the NFB should be reduced in its scope of production because it was considered to have an unfair competitive advantage in the marketplace as a recipient of

public funding. The Massey Report concluded that the NFB should have increased funding and should operate as the national producer and promoter of Canadian culture.

The report claimed that only a national organization could protect the nation from

excessive commercialization and Americanization. Significantly however, it did not offer

measures to change the status quo as far as distribution and exhibition were concerned

(Magder 1993, 83). The report did raise awareness of the American influence on

Canadian culture and it prompted the creation of what would become the Arts Council of

Canada (now the Canada Council) that to this day aids the development of Canadian

artists and promotes Canadian culture.

The 1950s

In the 1950s and 1960s, Ontario, and specifically Toronto, could boast no

Canadian film production companies that made feature films. In fact, there was little film

production outside of that which was created for television programming and

commercials. As Piers Handling claimed, English-speaking Canadian cinema—like the

French-speaking equivalent was "bom with the establishment of the NFB in 1939"

(Handling 1978, xiii).

24 Peter Morris argued that John Grierson's influence on young filmmakers' conception of their role as filmmakers was comprehensive; they, like him, believed that film was most properly used as a tool of social communications. Grierson's dictum had it that documentary filmmaking was the creative treatment of actuality. But while these young filmmakers could learn from the master, they were not mere slavish imitators, as would be proven by the feature films produced in Quebec and Ontario (Morris 1984, 190)

Still, Grierson's assertion that the stuff of life held countless stories of achievement and challenge was to influence Canadian cinema for decades; prominent examples of his influence are the films of Don Owen and Don Shebib (Handling 1978, 72). The NFB maintained its tradition of producing filmmaking professionals, spawning several filmmakers in various categories of film production. It is of little wonder, then, that many of the filmmakers that would graduate to various forms, including feature films, were trained and disciplined by the NFB.

In addition to the NFB's conceptual foundation, producers at the NFB, such as

Tom Daly, proved to have a lasting impact on the young filmmakers with which they worked. Daly is well known to have encouraged new approaches and styles. He was the executive producer of the famous Unit B that developed new documentary, animation and experimental film techniques during the 1950s and 1960s. Filmmakers such as Don

Owen and Arthur Lipsett, and animators such as Norman McLaren, developed under his guidance and support (Morris, The Film Companion, p78). In the 1950s, a few NFB and

CBC trained directors ventured into commercial filmmaking including Julian Roffman and Sidney Furie. Roffman directed The Bloody Brood (1959), inspired by the contemporary interest in juvenile delinquency, is a mix of gangster film, beatnik hipsters and reckless youth, and in 1961 he directed The Mask, a 3-D horror film that was destined to become a cult film (Gravestock 2005, 2). Sidney Furie, now well into his '80s, continues to make films, although he has been based in Los Angeles for many years.

Furie was a CBC television drama director in the early TV years of the 1950s.

Film Production for Television

When television invaded the homes of the 1950s, series production in English

Canada was very much dependent on American programming. By 1959 the Broadcast

Board of Governors declared that a minimum of 55 percent of programming must be made-in-Canada (in comparison, 75 percent of programming in Quebec was made by

Radio-Canada). The CBC focused on informational programmes: news casts, news specials, documentaries, and public affairs programs; only 13 percent of the programming time was devoted to the dramatic unit.

Up to this point, there had never been a commission set up to regulate the film industry or its role in production, distribution or exhibition. In 1958, by way of a new

Broadcast Act, the Canadian government created the Board of Broadcast Governors

(BBG). The BBG was given control over all broadcasting stations, including the CBC, which was established in 1952. The commission was to set policy for Canadian television and regulate the Canadian public's exposure to the programming coming from its neighbor to the south. The shift away from live television production in the U.S. meant the distribution of television programming to stations in the U.S and eventually to

Canadian stations as well. This move facilitated an avalanche of production in series television that in technical terms is the same as film production; that is, series television uses film technology and film-trained personnel. The programs and movies shot on film were distributed by telecine transfer technology, also known as the film chain. This system consists of at least one film projector, a slide projector, a multiplexer (selector for film or slides) and a telecine camera (see Television, http://www.danalee.ca).

The CBC did not have the film production capabilities needed to make series television. To make up for that shortcoming, the NFB provided a good deal of programming to the CBC. However, it could not keep up with the quantity of productions needed and the relatively quick turn-around time demanded by broadcast delivery. In the 1960s, the NFB abandoned television production, shifting its focus to regionally relevant productions. Meanwhile, in 1959, the CBC became a major purchaser of private productions from some 30 different film companies. As a result, film companies were also able to reap the benefits of the TV commercial business, which provided 50 percent of film production dollars in Canada. This not only made TV a safe and lucrative business in comparison to feature film production, but it was also provided important training for Canadian film crews. Commercial production companies, with the help of IATSE union technicians, made Toronto into one of the leading centres for commercial production in North America. As is discussed above, it was during this period that American film production companies established production centres in

Canada in order to gain access to the UK market by taking advantage of British subsidies that favored commonwealth nations. In 1957 there were 60 film production companies in

27 Canada, twice the amount that existed in 1952, the year the CBC founded its television stations in Toronto and Montreal.

In the mid-to-late 1950s, there were several TV series filmed in Canada by companies such as Television Programs of America (TPA). In 1956, TPA set up

Normandie Productions in Toronto. The major British co-production partner was the

Incorporated Television Company (ITC), which went on to produce some of the greatest television successes of the 1960s, such as Danger Man (1964), The Saint (1962-1969),

The Prisoner (1967) and many other well-known series and feature films. The TPA production included the use of American actors, but used Canadian equipment, crews, facilities and supporting actors. One example of a Canadian-based TPA production is

Hawkeye and the Last of the Mohicans (1957), which was pre-sold to the CBC and syndicated in the US, England, France and Central America; it premiered on April 3,

1957. Hawkeye and the Last of the Mohicans was a co-production television series made in Pickering, Ontario by American, Canadian and British producers, directors and crew.

The expertise that was brought into Canada for this series included the Director of

Photography, Eugene Shufton (aka, Eugen Schufftan), the Oscar-winning cinematographer of the film The Hustler (1961). This television series also co-starred

Lon Chaney, Jr., son of the American silent movie star.

It is also worth noting that most dramatic series television was and often still is, shot on film. Back then, the work was completed by artists and technicians imported from Britain and America. They trained the Toronto-based film crews. It is also historically significant that this was the first Hollywood-Canada collaboration; the series established the Ontario branch-plant industry that continues to thrive today. TPA's

Normandie Productions also produced The Adventures of Tugboat Annie (1957) and

Cannonball (1958), each of which ran for 39 episodes. The impact on the Canadian production community was dramatic and was in sharp contrast to the flailing feature film efforts of the time.

In 1958 the American-based International Alliance of Theatrical Stage Employees and Moving Picture Technicians (IATSE) union established a local branch in Canada and provided crews to series such as Hawkeye and the Last of the Mohican and Tugboat

Annie. The lATSE's theater-based Local 58 would become the film technicians Local

873. In the fall of 1958 work began on the 873's first television series, Cannonball which was filmed at Lakeshore Studios and lasted for about 26 weeks, or until May of 1959 (see

History of IATSE)

While Canadian features, such as director Sidney Furie's low-budget A

Dangerous Age (1959) or B-movies such as producer N.A. Taylor's Ivy League Killers

(1958) and The Bloody Brood (1959), may have received little attention, television was a different story. U.S. companies were producing television programs in Canada and training Canadian film technicians. This was a significant break from the past because it meant that Americans were spending money on this side of the border. In addition,

"branch plant" television production created a demand for more equipment, laboratory facilities and technical crew personnel (Dorland 1998, 50).

Beginning in the 1950s and continuing into the 1960s, Ontario-based film companies were establishing viable business models. Crawly, Taylor and Chetwyn had 29 built successful film companies that predominately serviced educational, industrial and television markets. Budge Crawley's company, Crawley Films, was based in Ottawa and had considerable success with industrial films and also, from 1958 to 1963, television series that included Royal Canadian Mounted Police and St. Lawrence North. In 1963 his company produced a feature film entitled Ville Jolie, but the company was unable to recoup the $200,000 that was invested in it. A year later Crawley released another feature: The Luck of Ginger Coffee (1964). This film also failed to generate a return on investment. This meant that even a well-established Canadian producer like Budge

Crawley could not make a go of it in feature films. With two films to his credit and with no return on their substantial investments, he retreated to television and short film productions (Magder 1993, 93)

Nat Taylor was another successful business owner in Ontario's film industry. He owned distribution companies and was also well established in exhibition, owning 65

Twentieth Century theatres. In addition, Taylor was a co-owner of the television station

CJOH, a private station in Ottawa. Taylor controlled the first vertically integrated corporate structure in Canada. Like others, he could not resist the lure of feature films and produced several movies including the 1961 release of The Mask.

Another key player in the industry was Arthur Chetwyn. His company, Chetwyn

Films, produced a considerable amount of television programming. He was a director of photography, and he and his wife produced many films, including documentaries and television programs specializing in education, health, travel and sports (

). Chetwyn was also the president of the Association of Motion Picture Producers 30 and Laboratories of Canada (AMPPLC). In that role, he led the effort to convince the government to reduce taxes and customs duties on equipment that was in high demand in

Canada as a result of increased domestic and branch plant production (Dorland 1998, 50).

Seven Arts Productions was another organization of note. This was a Canadian controlled production and distribution company that was capitalized on Toronto's stock exchange. William Goetz, a producer and Hollywood studio boss who revolutionized the industry with the development of a profit participation strategy, came out of retirement in

1964 to take the job of vice president at Seven Arts Productions Ltd. The chairman and driving force behind Seven Arts was Louis Chesler, who had served on the board of directors of Allied Artists.

Chesler, who like Goetz was an aficionado of horse racing and a reputed gambler, was also a major housing developer in Florida. Chesler was reputedly associated with the underworld crime bosses Vito Genovese and Meyer Lansky through the Florida real estate company that he owned with another Lansky associate. According to the article,

Chesler ran a Florida real estate development company for Lansky (Jon C. Hopwood +

Jack Backstreet, 2012.). Seven Arts Productions Ltd became a force by the early 1960s.

Louis Chester lived in Toronto and many of the stock-holders of Seven Arts were

Canadian citizens. The company produced many well-known films that were distributed

by the Hollywood major studios, including Lolita (1962) and The Dirty Dozen (1967),

and had investments in many more films from various studios (Seven Arts Productions

filmography, 2012). The company would eventually become Warner Bros. Seven Arts.

31 What is important about this story is the fact that in Canada there was money to be invested in feature films, as long as that money was tied to the established entertainment companies of the Hollywood majors. There was clearly a will to create feature films in

Ontario, as well as a growing base of international talent, that could have supported an industry. So what was the problem? What were the constraints? As had long been the case, distribution and finance remained the stumbling blocks impeding the development of a domestic feature film industry. Distribution was in the control of Hollywood interests, and Canadian banks had no experience with the financing structure common to the film industry.

The 1960s

The National Film Board ventured into feature filmmaking in 1963 with a co-production entitled Drylanders. The film's focus was on the settling of the prairies and cost $200,000 to make. That was a vast sum for the NFB and the film recovered only about a third of the production budget in box office receipts. The NFB had approached the CBC with an offer to co-produce Drylanders, but the CBC had no interest in the project (Melnyk 2003, 100).

In 1960 television was dominating entertainment media. One result of this trend was that in 1963 only 88 million motion picture theatre tickets were sold, whereas 247 million were sold in 1952 (Ibid., 101). Nobody Waved Goodbye (1964) is a hallmark film directed by Don Owen that revived the Anglo Canadian cinema. Originally conceived as a somewhat typical NFB documentary short on the popular subject of juvenile delinquency, the film eventually became what Piers Handling described as the groundwork for not only a Toronto-based film culture but also for English-Canadian cinema in general. Nobody Waved Goodbye was a forerunner to many of the influential

Canadian films that followed it (Gravestock 2005, 2-5)

Don Owen was the assistant director of Sidney Furie's A Cool Sound from Hell

(1959); he also played a beat poet in the film. An aspiring filmmaker himself, Owen would go on to create one of the most significant and formative films in English-

Canadian cinema. Owen moved to Montreal in 1960 to apprentice at the National Film

Board, which was then virtually the only place in Canada to learn the craft of filmmaking.

Of course, his training was in documentary and short-form films. He joined the famous

Unit B while at the NFB. Unit B was well known for its efforts to record everyday life in

Canada, a focus very much against the propaganda-style dictates of the John Grierson regime. Owen actually started as a cameraman on Quebecois films, most notably La lutte

(1961) and A Saint-Henri le cinq septembre (1962) with contributors including Brault,

Jutra, Groulx and Aquin. The direct film style he learned from the Quebecois filmmakers of Unit B is clearly evident in his early short (27 minutes), Toronto Jazz (1974), as well as well as in his first feature, Nobody Waved Goodbye and his later film, Partners (1976).

Although the movie is virtually unheard of in today's film culture, Nobody Waved

Goodbye, like Don Shebib's Goin' Down the Road (1970), was one of the most important fiction films to come out of the English-Canadian film industry in the 1960s and 70s. The film combines documentary-style realism with fiction elements and improvisation. The film's shooting style relied on the hand-held camera technique developed by the filmmakers of Unit B. The film was even mistaken as a documentary film by some, as 33 would be the case with Don Shebib's later film, Goin' Down the Road. Peter Harcourt remarked that the film's spontaneity, vitality and transparency was made possible by way of a lack of a feature film tradition (Harcourt 1997). This stylistic approach, in which a feature film is made to resemble a documentary in its contextual approach, would later be put to use in the films of Don Shebib and others; but Nobody Waved Goodbye came out this way because it was based on what Owen knew best: documentary filmmaking.

Nobody Waved Goodbye was produced by the NFB for approximately $75,000.

What started out as a short documentary became a full-length feature because Owen was able to dog NFB executives while shooting in the summer months in addition to gathering unofficial support and encouragement from his producer and fellow filmmaker, Roman

Kroitor. He was also able to gather the support of others who supported new approaches at the NFB, such as Tom Daly, the head of Unit-B and the original cinema direct filmmaker. The film received nominal theatrical exposure in 1964. Some criticism was flatly hostile. Nat Taylor, the producer of 1950's B-movies, called it "amateur night in

Hicksville" (Gravestock 2005, xxiii). But while it was panned by some Canadian critics, it was praised in New York, where it was compared by the critic at the New Yorker to the coming-of-age novel The Catcher in the Rye (Melnyk 2003, 102). The well-known film journalist Judith Crist considered it one the most significant films of the year after she saw it at the New York Film Festival in September of 1964. The film was subsequently re-released in Canada and was significantly more successful due to the influence of those

American critics.

34 The cinema direct filmmaking style was made possible by the light-weight equipment and synch-sound technology that had been developed to meet the needs of the smaller and more mobile crews demanded by television production. Innovations such as crystal-sync cameras, pilot tone audio recorders and lighter lighting equipment allowed for increased mobility; that mobility was increased further by the newly developed ability to separate cameras and sound recorders, which in the past had needed to be combined.

Unit B's filmmaking approach was combined with the practice of producer/filmmaker

Tom Daly, who encouraged directors to shoot until you had the theme that you wanted.

Owen typically shot 75,000 feet of film, creating 31.5 hours of material that would then be cut down to produce an 80 minute feature (Gravestock 2005, 34). As is typical of documentaries, this type of film is really made in the edit room. Owen's approach, with its high shooting ratio (23:1 versus the average dramatic film ratio of 4:1), required taking a few weeks just to view the material at hand.

Nobody Waved Goodbye is a milestone of independent domestic feature production in Canada, and radically different from other films made in that period simply in that it portrayed landmarks that were clearly Torontonian, an urban environment of alienation and a WASP-dominated society. This would also turn out to be the case in the films of Owen and Shebib. According to Steve Gravestock, the Director of Canadian

Special Projects for Toronto International Film Festival (TIFF), Nobody Waved Goodbye not only kick-started the feature film industry in English Canada, but it also influenced the Quebec filmmaker Gilles Groulx. Groulx's first feature, Le chat dans le sac (1964), was also originally intended to be a documentary short, as was the case with Gille Carles' Les vie heureuse de Leopold Z (1965). That said, this may have been due to the influence of NFB producers that were interested in pushing feature film possibilities.

Don Shebib's Goin' Down the Road (1970) demonstrated a greater complexity of regional disparity and somewhat more entertaining characters than did Owen's Nobody

Waved Goodbye. Goin' Down the Road also had a mix of exploitation and naivete. The other feature films in Don Owen's filmography include The Ernie Game (1967), and

Partners (1976). Other films of note by Owen include Ladies and Gentlemen (1965), Mr.

Leonard Cohen (1965) and Richler of St. Urbain St. (1970) along with many others.

Don Shebib's Goin' Down the Road is the tale of two characters from the east coast. It was released in 1970 but it was conceived, written, shot and completed in the

'60s. Shebib had roots in Cape Breton. Goin' Down the Road, his first feature, was originally conceived as a TV drama for the CBC, but soon morphed into an almost painfully realistic account of two maritimers venturing to the big city of Toronto. The budget for Goin' Down the Road was $85,000. The film used methods such as capitalizing on available light to create a distinct "documentary" look and feel reminiscent of Nobody Waved Goodbye. The DOP for the film, Richard Leiterman, had a lot to do with that feel. Leiterman had just completed shooting A Married Couple (1969), a direct cinema documentary directed by Allan King. Goin' Down the Road was

Leiterman's first feature and the somewhat under-produced look he crafted adds a gritty realism to the film's raw characters and their impoverished circumstances. The film's other inescapable influence was the Griersonian insistence on mimicking the "stuff of life," an aesthetic Shebib was weaned on as an NFB filmmaker. Of course, the documentary style also accommodates a low-budget production while maintaining creative integrity.

The sixties were a promising new beginning for English-Canadian independent domestic cinema. The decade saw a shift from the NFB's heavy reliance on documentary filmmaking to a successful focus on dramatic feature films, however documentary-like they may have been. Goin' Down the Road grossed over $150,000.00 in its first two

months. It was recognized in New York and won Feature Film of the Year at the

Canadian Film Awards in 1970. An article in McLean's magazine claimed "no feature

film since Don Owen's Nobody Waved Goodbye has generated so much optimism about

the future of Canada's sputtering film industry" (Melnyk 2003, 110).

Shebib's other major feature films are Rip-Off (1971) and Between Friends

(1973). Nobody Waved Goodbye was funded from the coffers of the NFB while Goin'

Down the Road was produced by the independent domestic producers at Evdon Films and

had financial assistance from the Canadian Film Development Corporation (created by

the federal government in 1968).

Federal Support: CFDC and TELEFILM

In advance of government action to create a film development corporation, studies

in various areas revealed the same constraints that had always hindered the industry's

development in Canada: foreign control of theatrical distribution and financial resources.

Michal Spencer, the director of planning for the NFB, produced one such report in 1965

that described two distinctly different types of producers: established and independent.

According to Spencer's report, established producers sought an international market for their films, preferred to use international talent and technical expertise, and had little or no interest in Canadian content. They also had large budgets and little difficulty raising money. Independent producers, on the other hand, expected at least some success in the

Canadian market and preferred using Canadian content and Canadian talent and technical support. Their films were typically low-budget (Dorland 1998, 100). The report proved to be accurate.

The opposing production values and goals described in Spencer's report could be used to describe the business models that exist today among producers. Those models are either based on economic or cultural ambitions. However, those models, and the producers or would-be producers that use them, were found in the report to share a similar constraint when it comes to distribution. Established producers expected access to financing to ensure international economic returns while the Canadian content filmmakers were looking to the government for support.

Another survey, conducted by Fernand Cadieux, added to the complexity of the argument for a Canadian film development corporation. The Cadieux survey indicated that Quebec filmmakers where focused on film first as a means of expression and second as a source of revenue. These production values aligned with the Canadian content filmmaker's intent to succeed in a domestic market rather than utilize international talent and creative resources to appeal to an international market.

In 1964-65 Otto Firestone added to the government surveys with a study of feature film distribution in Canada that proposed to explore a viable approach for government to establish a film industry. The study examined the auto industry's model of export that harmonized products with trade agreements, and hinted at borrowing that model for use in the film industry. The study revealed that 80 percent of theatrical distribution in Canada was U.S. controlled. Firestone's study considered not only theatrical distribution but also television as a means to reverse this trend. Television was not controlled by the U.S. major studios but by the Canadian government. The Canadian television market was a mix of federally supported stations and private broadcasters. But in the end Firestone chose to advocate for pursuing a deal with American interests to harmonize U.S. and Canadian feature film distribution. American distributors had no interest in including Canadian films.

These surveys indicated that the government was considering the film industry with a focus on its economic aspects, but not entirely. The two distinct approaches identified by Michael Spencer had become confused as the government attempted to promote larger budget projects for a theatrical market without providing any support for the distribution and exhibition of the proposed products. This confusion was on display in Firestone's study, which failed to consider television as a distribution medium for films. While cinema requires big budgets and high production values to attract an audience, the cultural goals identified by Spencer could have been pursued using the lower budgets required of films made for television. In addition, this strategy would have provided an opportunity for filmmakers, actors, technicians and craftsman to develop their skills.

In 1968 the Canadian Film Development Fund (CFDC), initiated through government legislation in 1966, began loaning funds to the private sector, providing the means to produce many of the early classics of Canadian cinema. The model it adopted from Britain defined a Canadian film using employment criteria. However, the fund failed Canadian producers by making deals with the American majors and losing most of the public's money in the process. In his book Hollywood North, Michael Spencer offers a very personal and unique insider view of the CFDC's creation and operation. Spencer explains that while the Massey Report focused on culture, the government's focus was more on economics and industry growth. In the end, the CFDC's policy floundered, lost somewhere between treating the film industry as a profit maker and as a cultural institution. The policy of the government failed to address the key issue effecting

Canadian production growth: distribution and exhibition. The fact remained that

Canadian independent producers could not get distribution in their own market. It soon became apparent that the CFDC could not bolster the industry, with too little money ($10 million) to offer for the creation of a feature-film industry. To make matters worse, the government provided no support mechanism for the theatrical exhibition of what was produced.

Capital Gains Allowance

The Capital Gains Allowance, which lasted from 1975 to 1982, was a tax shelter scheme that resulted in a number of films, however few were ever screened. The benefits went mostly to brokerages, lawyers, accountants, executive producers, and expensive foreign talent. In 1979 the industry's output exceeded Hollywood by 50 percent (Magder

1993, 190). The scheme provided for a 100 percent tax deduction on investments in feature films "certified as Canadian"; thus, the scheme worked in conjunction with CFDC funding to encourage the production of feature films for export. While many of the films were not worthy of screening, some notable classics include The Grey Fox (1982), Who

Has Seen the Wind (1977), and Les Plouffe (1981). Films of arguably lesser cultural significance include b-movies such as Meatballs (1979), Porky's (1981), and Prom Night

(1980), each of which enjoyed great box office success and contributed to the industry's growth.

Despite those successes, some have criticized the Canadian government for choosing the path of least resistance. A tax on the distributor's gross profit would have generated a reasonable sum that could have supported Canadian productions, while a law to restrict the access of foreign distributors to Canadian films would have helped to establish a stable base of Canadian distributors that would have been more likely to invest in domestic productions. These reforms were eventually implemented, but not until the focus shifted to support for television. The Canadian Broadcast Program Development

Fund (administered by the CFDC) was created in 1983 and prompted many Canadian feature film producers to shift their attention to the making of made-for-television movies, or movies-of-the-week (MOWs), and other forms of television programming, including drama, variety and children's shows and documentaries.

The Broadcast Fund dispensed $35 million in 1983 and increased funding yearly until it reached $60 million in 1988. The CFDC was expected to assume no more than one-third of the cost of any given project. Any project taken on by the CFDC required a broadcaster license or an agreement to air the program during prime time within two years of completion. The Broadcast Fund was an enormous incentive for Canadian independent feature film producers to shift their activities to the production of made-for- television features and other forms of television programming (Magder 1998, 209).

The Canadian government's new strategy had finally solved the decades-old problems involving distribution and exhibition by gearing production activities to the regulated market of Canadian television. The shift in focus to a deliverable product made for television further diminished the potential for theatrical distribution and made cinema distribution a minor factor in maximizing publicity for a film.

In 1984, the Canadian Radio and Television Commission (CRTC) revised the definition of a Canadian program and introduced a 10-point system that was harmonized with, but not identical to, the CAVCO system.

The name of the CFDC was changed to Telefilm in February of 1984, reflecting the shift in emphasis from production intended for theatrical exhibition to that intended for television. The Broadcast Fund increased production of Canadian drama and fictional programming and encouraged a modified "branch-plant" film-production-for-television industry (Ibid., 212-214). The new focus was on the production of Canadian films for export, with a specific emphasis on marketing Canadian films and television series. The government clearly intended to treat made-for-television films and series as two sides of the same coin, as the CFDC's new name Telefilm Canada clearly indicates. The creation of the Cable Production Fund in 1993 provided further financial incentives to both

Canadian producers and broadcasters to increase the volume and quality of Canadian content television programming.

42 In 1995 the Canadian Production Tax Credit (CPTC) was introduced and focused on film and video and encouraged Canadian content production in an effort to help develop the domestic independent production sector. In 1996, the creation of the Canada

Television and Cable Production Fund (CTCPF) combined the resources of the Canadian

Broadcast Program Development Fund (Telefilm administered) and the Cable Production

Fund (CPF), and added a government contribution to the mix. The CPF was financed by cable companies, who contributed 5 percent of their annual profits to the fund, and by the

Telefilm Broadcast Fund, which was financed by appropriations of approximately $100 million per year. The newly created CTCPF provided up to $200 million annually for independent television production across Canada. This fund has since been renamed the

Canadian Television Fund (CTF).

The CTF was intended to increase both the quality and the quantity of Canadian television programming, as well as foster production in all regions of Canada. As Serra

Tinic has pointed out, the CTF became a catch-22 for regional producers because the fund required a producer to have a distribution deal and a broadcaster license in place before funding could be provided. Since broadcasters are inclined, as in any business practice, to minimize their risk, they tended to be more willing to make cash advances to independent producers with established reputations. Thus, independent producers with connections to the major networks, most of which are based in Toronto, gained a competitive advantage; this essentially eliminated regional producers from the network level (Tinic 2005, 86-87). In 1996 Telefilm began to only support Canadian productions that obtained at least 8 out of 10 points. Points for key creative positions were given by 43 CAVCO for a Canadian Content Certificate only when there were Canadians in the positions such as the producer, screenwriter, director, cinematographer, editor, or principal actor. Prior to this time, Telefilm usually required 8 points but there was no formal requirement to do so.

The 1970s and 1980s

In addition to CFDC support, the Capital Cost Allowance (CCA) allowed investors to write off 60 percent of their investment in a feature film against their personal

income taxes. There had been few Canadian feature films in which to invest prior to

1970, but with the relative success of Nobody Waved Goodbye and Goin' Down the Road

and with the CFDC's legitimization of feature production, new interest arose and helped

domestic independent producers to attract private funding. In 1975 the CCA was

increased to a 100 percent tax right off. While the CFDC had once funded up to 49

percent of film production, in 1980 it was providing less than 1 percent of equity funding

to Canadian feature films, and most budgets were in the $3 million range (Melnyk 2003,

115). For instance, Meatballs, a certified Canadian film made in 1979, had a budget of

$1.6 million. The producers received $3.3 million from Paramount for U.S. distribution

rights and another $300,000 for the Canadian rights. The film grossed $40 million in

1979 and continues to sell on DVD. Although it was short on art, this wacky comedy

directed by Ivan Reitman was the envy of the film industry.

Hundreds of films were produced during the 1970s but only half were ever

released. Meatballs (1979) was made during the Capital Cost Allowance period (1975 to

1982) as was one of the all time-highest grossing films ever made in Canada: Porky's 44 (1982). While films like these with questionable artistic merit were certainly well represented in Ontario in this era, they did not make up the whole field of Canadian film at the time. In British Columbia, for example, there were some excellent films produced, such as the award-winning The Grey Fox (1982). Directed by Philip Borsos the film had a budget of $4.5 million. Other films of note that were made outside of Ontario in the seventies included an adaptation of the Mordecae Richler stories, The Apprenticeship of

Duddy Kravitz(\974) and Lies My Father Told Me (1975) which were set in Montreal, and Paperback Hero (1973) and In Praise of Older Women (1978) which were set in

Saskatchewan, as well as Slipstream (1973) which was set in Alberta. For the most part, the films of the seventies that took advantage of the "tax shelter" were Hollywood style imitations. The tax shelter years also initiated Canadian industry leaders such as

Alliance, Astral, Cinar, Paragon, and Tiberius (Gasher 2002, 57). By 1983, its final year, the CFDC had a budget of $0.5 million. Its successor, Telefilm, had a first year budget of

$35 million and had $60 million to spend by 1988 as the government linked feature film and independent television production budgets.

In 1975 David Cronenberg arrived on the scene with Shivers a contemporary body-horror written by Cronenberg and produced by Ian Reitman (of Meatballs fame).

The budget was $180,000 and received $75,000 in CFDC support. The film grossed $5 million, making it the most successful film to date in which the CFDC held equity.

Cronenberg followed this with Rabid in 1976, coming in at a cost of $350,000.00 and grossing $7 million. Cronenberg's "exploitation films" made during the 70s took full advantage of the tax shelter. His third film, The Brood, (1979) had a budget of $1.4 45 million. While Cronenberg had made a couple of very low budget films before Shivers, in the 1970s he quickly graduated from a filmmaker to a moviemaker. Canadian films in the 1970s were mostly focused on making money by imitating Hollywood films and cashing in on the lucrative potential of box-office success while the eighties brought some maturity to the Canadian feature film and to world audiences. Piers Handling has pointed out that Cronenberg's films have been looked upon as aberrations in this country because they are "totally alien to our artistic tradition." The idea here is that Cronenberg's work is a far cry from the realist films encouraged by the Griersonion aesthetic. Handling even claims that Cronenberg's films "are radically un-Canadian" (Handling 1983). Indeed,

Cronenberg has used horror, science fiction, technology and even pornography to create

his fantasy-based films.

The eighties saw a continuation of the tax shelter-prompted proliferation of so-

called B-Movies, along with many poor efforts. The decade's milieu also allowed

Cronenberg to create Scanners (with a $4.1 million budget) and his final B-Movie, 1982's

Videodrome, which would prove to be the last of his auteur efforts. In 1982 the Capital

Cost Allowance was being fazed-out and would have a dramatic effect on independent

production but by this time Cronenberg had proven himself like Norman Jewison, to be

capable of producing Hollywood-caliber films. In 1983 he directed The Dead Zone,

based on a story by Stephen King. In 1986 Cronenberg made a remake of the 1958 horror

film, The Fly; it was shot in Toronto at the Kleinberg Studios just north of Toronto. The

budget for the film was $10 million and it grossed $100 million. This put Cronenberg

into the major league division of feature film production. He followed this in 1988 with Dead Ringer, which had a budget of $13 million. I repeat the fact that there was and is money in Canada to be invested in feature films, as long as that money is tied to the established entertainment of the Hollywood majors. In other words, as long as there is a minimal risk for the investor.

Atom Egoyan's first auteur film was Next of Kin (1984). His second feature was the 1987 release Family Viewing, followed by 1989's Speaking Parts. While

Cronenberg's world is clearly visualized for the audience, Egoyan creates an interior experience requiring the audience to probe the film and their own understanding (Melnyk

2003, 159).

Cronenberg's films are clearly in the Hollywood entertainment tradition, and he has also followed a financing model based on private investment, which is similar to how

American independent filmmakers operate. His content also reflects an interest in international marketing appeal. By contrast, a very different sense of entertainment value and government support has been a key factor in financing Egoyan's films. Egoyan's films are more specifically focused with cultural references, as opposed to Cornenberg's films that have more of an "anywhere" setting for marketability. While both are examples of successful independent domestic production, to some degree these filmmakers exemplify opposing financial support models that have grown out of the apparent division of economic and cultural interests in the Canadian film industry.

The 1990's and a New Century

In the 1990's independent domestic production continues to develop with notable filmmakers such as Cronenberg continuing to make adaptation films and Egoyan 47 continuing to make auteur films. But like Cronenberg's Vidoedrome, Egoyan's 1994 film

Exotica would mark a shift from auteurism to adaptations. The film won the International

Critics' Award at Cannes. The 1999 release of Sweet Hereafter, based on a novel by the

American writer Russell Banks, earned Egoyan a nomination for best director at the

Academy Awards. Sweet Hereafter followed by Felicia's Journey is based on a novel by

Irish writer William Trevor.

Meanwhile, Cronenberg's budgets continued to grow through the 1990s and beyond with Naked Lunch (1991) at $17 million, M Butterfly (1993) at $22 million, and eXistenZ (1999) at $30 million. The exception to this trend was the 1996 film adaptation of Crash (1996), which cost less than $10 million to make. Cronenberg altered the

Canadian film landscape by making unique science fiction like films and paving the way for the next generation of Canadian feature filmmakers.

Hollywood major studio production depends on the flow of capital generated by distributors. In Canada that "flow" is virtually non-existent for most Canadian features.

In addition, the federal government has never insisted that films produced with its support, whether through the CDFC or the Capital Cost Allowance, be distributed in

Canada or by Canadian firms. On the contrary, according to Michael Spencer the CFDC made deals with the major distributors that resulted in a film's profits being taken by the distributors with no return for the CFDC or the film's producers (Magder 1993, 216-218).

The cost of exporting or importing cultural products makes it even more difficult for Canadian productions to compete on an equal footing with international competition.

In addition, the low cost of syndicating American television programming on Canadian television networks provides an opportunity for increased advertising revenue and reinforces U.S. domination. The economic dominance of U.S. programming is easily explained by the fact that it has already been paid for by US broadcasters. Thus, the price for Canadian broadcasters to run those programs is far, far less than it is for creating original Canadian programming. In the end, this just creates more cash flow for the major studios, further increasing their power. A Canadian broadcaster providing

Canadian produced programming faces a cost of production that exceeds the potential advertising revenue that would pay for the programming. As a result any independent domestic programming that Canadian broadcasters produce or license must be exported to return a profit.

The same is true for MOWs. These low budget movies produced in the U.S. are paid for by national networks or subscriber-based cable networks, but the Canadian market is simply too small for this level of production; thus the popularity of the "co- production" or co-venture approach. That is not to say there is no export potential from

Canada. There is, and the fact is that co-production or co-venture is the only financial model that guarantees a return on investment.

Magder has posed two important questions: should the goal be to compete with

Hollywood and the United States? Should filmmaking be a means of cultural expression, or an economically driven product? He concludes that filmmaking is more than just

business; it is an art form. In fact, it encompasses several art forms. In his view, there is

nothing prohibiting an all-inclusive acceptance of film as art and culture, as the multitude

of film festivals in Canada suggests. The interest of artists and the public demonstrates support well beyond television exhibition. Independent feature films continue to be shot in Canada and production venues have sprung up across the country. In addition, the service industry has provinces competing with each other, the U.S. and other sites around the world to be used as locations for film production. The current dollar exchange rate is very influential in this competition, as are tax credits and other local incentives. While technology is also changing and lowering budgets for digital production methods it is not necessarily affecting costs particularly for bigger budget films that require expensive talent, sets, and computer graphics but it is providing more access to low budget independent producers.

50 Chapter 2

Development and Funding

Feature films are thought by many to be more art than business because of the craftsmanship that goes into them. As Louise Levison, the author of the business plan for

The Blair Witch Project, points out, "if movies were an art form then it would be called show art instead of show business" (Levison 2007,4). Levison is referring to commercial features; but regardless of the type of film, the filmmaker is always a business entrepreneur.

The independent domestic Canadian films that we have identified above are movies as industry and commerce, and movies as culture. Generally feature films are considered to be an entertainment-based medium and, as we saw in the history of film in

Ontario. But whatever the genre or the filmmaker's intent, the making of a feature length film is a very expensive enterprise. As a result, a great deal of planning and business management must go into the project at the outset.

A film starts as an idea, but it must be asked: how does an idea become a tangible reality? A better question might be: what is stopping the filmmaker from making the film? Aside from good pitching skills, one needs a comprehensive project proposal or treatment to use as a marketing tool. This is used to attract funding, key creative collaborators, and acting talent to the project; in other words, it is made to convince various people to invest in the proposed film in various ways. The financing may take a great deal of time and effort to secure, and it is often the ultimate obstacle to producing

any film. The first phase of film production begins with the development of a property; 51 this generally refers to the acquisition of the production story or screenplay. The development phase may take months or years. Assuming the production gets the support and funding required, the first phase of production is referred to as the "pre-production

phase."

Once funding is in place, the production phase in which the film is shot begins;

this is referred to as the "principle photography phase." After the production phase the

"post-production phase" begins. This phase includes editing and may start whenever

there is enough footage available for the editor to begin "synchronizing the rushes," or

matching the dialogue with the picture to assemble the material for a "rough-cut." When

the sometimes lengthy process of editing the picture is complete, a process in which is created a satisfactory telling of the story but not necessarily one that follows the shooting script, the resulting product is called the "picture lock." This is a final story edit. After

this stage, the audio elements can be created and recorded. The audio portion of the film

includes ambient or atmospheric sounds, sound effects (such as creaking doors), foley effects (sounds that match the motion of characters, such as footsteps), and a composer's recorded music. The last step in the production of the film is the sound mix, in which all

the audio elements are added along with the tracks to be used in the final version of the

picture. When post-production is completed, the final release print of the film is made

ready for distribution and exhibition.

There is a marketing component in the filmmaking process that may begin in the

developmental stage and continue through to the release of a picture. This marketing component is a combination of Publicity and Advertising. (For more on this see Chapter 4,) Publicity is an important part of the marketing mix throughout the production phases.

It is a necessary and effective means of creating visibility for the project in the media and ultimately creating an awareness and anticipation of the film in the minds of the public.

Development of the Property

Filmmaking is a collaborative endeavour from the very beginning of a project. It requires the collaboration of a producer, writer, distributor (and/or broadcaster) and director. It may also involve the director of photography the production designer, the production manager and others. Other input may also come from actors, distributors, broadcasters, marketing personnel, investors, financiers, lawyers, accountants, funding agencies, and other consultants. Regardless of the communication required, the producer is responsible for initiating and managing the collaboration of both the creative and business personnel involved in the development. The fundamental task of a producer includes insuring that the project is as risk-free as possible, and, of course, there is the need to bring the project in on budget.

While distributors and others may predict audience attendance for a film project idea, it is impossible to know the likelihood of success. Even well established directors and producers have failures, while unknowns may gain a cult following. Most ideas never even get as far as being shot. The high degree of risk translates into a high failure rate.

As a result, there are a number of risk management strategies used in the film industry. For Hollywood major studios it is the sheer volume of production that ensures that few successes will emerge from the many failures. A Hollywood screenwriter William Goldman famously put it, "Nobody knows anything" about predicting the success of films. Large-scale production provides a mitigating circumstance of constant production. In this system, a universally accepted film like Titanic (1997) or a cult hit like the Rocky Horror Picture Show (1975) makes up for the many inevitable failures.

But in Canada there is no such scenario. Almost all independent domestic films considered to be a "Canadian film" or culture-focused auteurist mold are box office failures largely due to lack of exhibition opportunities. If the film fits the international film economic mold, then it will have a much wider appeal and thus a greater chance of distribution to foreign markets.

The key aspect of risk management for Hollywood majors is the control of distribution and exhibition. Another tactic of Hollywood is to focus on projects that have a proven component that increases the chances that a movie will appeal to a large audience; that component often comes in the form of star power or by adapting a popular novel or comic book series. Another important factor in the transnational Hollywood model is the conglomerate ownership of the major studios, which is able to spread the financial risk over different media for publicity, advertising, and publishing. The current state of conglomerate ownership is somewhat similar to the vertical integration that existed in the past, with a cycle of funding flowing back to sustain continued production.

However, the current system is potentially even more effective that the past because the state of modern publicity and advertising makes it easier to create and sustain awareness of products in the media and popular culture.

54 Individual distributors reduce their risk further by the continued use of coercive practices such as block booking, by which desirable films are packaged with less than desirable films and offered to exhibitors, who must accept the package or face not getting the desired film. Another risk management tactic used by distributors is the careful control of the positioning of a product, determining where, when, and to whom the film is exhibited. Exhibition of a film is controlled by strategically targeting the audience for a specific film with careful consideration of demographics.

Budgets

Once a property has been established, a development budget must be created.

That budget determines the funding allocated to have the story written, research the potential success of the project, generate investor interest, secure a distribution agreement, acquire a broadcast license agreement, and other possible pre-sale activities.

A producer recoups the development budget including it in the above-the-line portion of the budget for the entire filmmaking enterprise.

The preliminary budget of a film must be based on the perceived scope of the film. It must be decided if a given film requires, for instance, a $500,000 budget or a

$15,000,000 budget. This normally requires the services of an experienced production manager who is familiar with the type of production you propose to make. He or she will know the budget range that will be required for a specific kind of film project in terms of equipment, logistics, crew and, most importantly, the time required to shoot the current script.

55 The Development Budget also serves to cover a number of expenses that the producer will incur while trying to get the project to the next phase of the process. The

Development Budget should include story rights that may be a first option or the screenplay cost as contracted by installments with a screenwriter. Legal costs must also be estimated concerning optioning, literary rights purchase, and a writer's agreement contract. There are also office costs for clerical, business equipment, printing, courier, mail, phone expenses, and petty cash allotment.

Expenses for research may be required for script development or marketing.

Travel and accommodation expenses could include the cost of visiting a distributor or attending a film market, convention or festival to gain more knowledge of sales potential.

Art is also required for posters and other branding. Expenses for accounting include paying for the handling of taxes, the tracking of expenses, and cash flow analysis. An overhead fee of 15 percent is generally allowed, in addition to a 15% fee to be paid to the producer. Generally, the development budget will be included in the "above-the-line"

portion of the overall budget in order to ensure the recoupment of the expenses involved

in the development phase of the filmmaking process.

The Production Budget is arrived at only after the development process is

complete and possible, and often multiple, adjustments have been made to key personnel,

the cast, funding, and agency or investor approval. Experienced producers advise that the

key to making a successful budget is to be as realistic as possible. That requires that the

crew, equipment, location, and all other needs be obtained from creditable sources such as

unions, guilds or suppliers. A motion picture budget is broken down into two main sections: the creative costs, or controllable costs, and the general production costs, or uncontrollable costs. The controllable costs, also known as fixed costs, are referred to as the above-the-line costs.

These usually include deals, contracts or guarantees for creative services. Above-the-line items may include property rights (e.g., copyright for a novella), or the writer's fee for the screenplay. They may also include fees for principal actors, a director, a production designer, a director of photography or a musical composer. Development costs are also

considered above-the-line. Recoupment of the development costs may go to pay

advances or to pay off loans that funded the development phase. The producer's fee,

which makes up 10% to 15 % of the production expenses, is also included in this section

of the budget.

Uncontrollable or unfixed costs are known as below-the-line costs. These costs

include almost everything that is not a fixed cost and may fluctuate depending upon

several factors, such as the number of hours spent each day on principle photography (this

includes crew overtime). Below-the-line items include performer fees (there are various

categories for union actors, plus fringe benefit payment), crew labour costs, including

camera, electrical, grip and sound labour (union or non-union), production staff (some

may be guild members with fixed rates), design labour, construction labour, set dressing

and prop labour, special effects labour, wardrobe, make-up and hair labour. There may

also be transportation costs, location costs, rentals, construction material costs, travel and

accommodation for remote locations, studio rental and equipment costs, film stock and

processing costs, and telecine transfer or video storage and technician costs. There are also the post-production costs, including for editing facilities, editors and assistants, post- production sound, final online edit, digital intermediates and release print costs. Other below-the-line items that are not directly related to production may include unit publicity, insurance costs for a completion guarantee (up to 6% of production budget items), errors and omissions insurance, corporate overhead (office related expenses), contingency

(usually 10% of overall production cost), and legal fees for investor relations.

Every effort should be made to establish a negotiated cost for all items but costs can escalate in areas like the art department, where wardrobe, set propping or materials may change with the choices made during shooting or a need to rush the completion of items. While the producer, production manager, and department heads will attempt to secure the best deals, there are almost always unforeseen expenses involved. Based on the "script breakdown" sheets created by the production manager, the information and requirements to shoot the script are itemized into categories for each scene. The department heads receive the breakdown sheets, which provide the means to create individual budgets for each department.

A commonly used template for budgets comes from Telefilm Canada. This budget is well organized; it includes categories and line items for almost every conceivable cost that can be included in a production. The summary budget or "top sheet" is usually included ahead of the complete budget and can be used in presentation material such as a "treatment package" for investor and funding agency scrutiny.

The budget will be seen by anyone with an interest to invest in the film project, including investors, funding agencies (if applicable), broadcasters providing license agreements, or distributors providing advances. Insurance brokers review the budget to determine the extent of coverage and determine premium costs. Lawyers use the budget to prepare contracts. The completion guarantor must approve the budget before production begins. In addition, key department heads use the budget to allocate funds.

Unions or guilds may also review the top sheet to ensure that their constituents have been properly provided for in the budget. Production accountants use it to access tracking expenses and cost reporting. Weekly cost reports are monitored by investors, guarantors and possibly broadcasters (Hehner 1995, 56-57).

On the business side of the producer's office, the essential personnel include a production manager, a first assistant director, a production coordinator, and a production accountant. The production manager is usually hired in the very early stages of the process to create a scene-by-scene script breakdown to assist in the creation of a preliminary budget during the development phase of the project. The producer also has to hire the core working group that includes key creative personnel such as the director, cinematographer and production designer. All of these key roles may be placed on a retainer for the duration of a film's development and contribute to the budget.

The Business Plan

Canadian producers have always had to be experts in complex financing structures

that involve an often bewildering mix of private money, public funds, tax laws, internal

treaties and banks (Du 1999). As is often the case in Canadian films, the filmmaker is an

auteur who has crafted the script and intends to direct the film. The economic reality

demands that the filmmaker also be a good business manager. The need to manage money, usually someone else's, is one in a myriad of tasks the producer has to manage.

Again, making a feature film is a business enterprise, no matter the ambition involved or the expected distribution. Management of a feature production requires financial planning, marketing and establishing a budget that reflects the box office receipt potential.

A business plan for a single film may be appropriate for an art film project, but for a commercial film, as Levison advises, independent filmmakers should create a business plan for the company that will make the film. This is good advice, given that a filmmaker's intention is likely to be to make more than one film. The objectives of the company may attract investors for a specific project and help provide a sustainable enterprise for an ongoing variety of film or television production.

As Levison indicates, the business plan for a production company should include an executive summary and a description of the mission, the company team, the films associated with the company, the industry, the markets, plans for distribution, risk factors,

and a financial plan. If a project is a commercial film, then this is certainly a prerequisite

to any success. If the intent of the filmmaker is cultural, a single film plan is still

necessary and the categories and topics listed above all apply, with the exception of those

concerning the company. The art film genre has a distinct distribution network, and

investors have to be convinced of the viability of distribution before they will provide funding, whether a film is government supported or funded by other sources. The

business plan for a single film project should cover the following areas: summary,

60 synopsis, creative treatment, creative team, marketing (including target audience and market potential), budget, and financial plan.

The Marketing Plan

The marketing plan outlines the activities planned to market and distribute a film project, including publicity and advertising. The audience should be clearly defined.

Publicity included "unit publicity" or publicity that occurs during the production phase with on-set photography and possibly video interviews with B-Roll (cut-away material for on-air use) packaged for the distribution of a "press kit" to the media. Media relations companies may also be engaged to plan publicity tactics like director and cast appearances on TV and radio, pre-release screenings and others.

The plan may also include input from a distributor, whose responsibility it usually is to cover the cost of prints and advertising (P & A) for theatrical distribution.

Advertising involves the buying of space for newspaper, possibly time for radio exposure and, in some very rare cases in Canada, a TV commercial. Common promotion tactics used by distributors to increase awareness of a film include an Internet website and other related web exposure. The marketing plan may also outline the potential exploitation of festivals and include festival publicity (via a press kit), film prints or digital copies, and media relations. Post-theatrical exploitation may also play a part in the plan.

Financing Development financing sources include the Canadian Telefilm Fund (administered by Telefilm Canada), the Canadian Council for the Arts, the Coras Development Fund, the Harold Greenberg Fund (which is involved in script development), and the Canadian

61 International Development Agency. The Financial Plan establishes the building blocks of the budget and it should outline all the funding sources, secured and unsecured to be used to meet the budget. The plan should include sources of funding, including distributor investment, a broadcaster license, equity investment (funding agency), private investment, tax credits (provincial and federal), and deferrals (producer's fee and other fees).

Raising the production financing, as outlined in the financial plan, requires the following: establishing the budget; hiring a production manager or line producer to do script breakdowns; determining the financing structure by identifying the various sources of funding, like the distributor, which is used as leverage for other sources; establishing pre-sales to, for example, the broadcaster (through a license agreement) and pay TV; securing private funding; securing public funding from agencies like Telefilm and provincial sources; taking advantage of tax credits; and utilizing production team deferrals.

Funding for the development of a property may be found from a variety of sources, including various levels of government and private sources. Generally, the criteria to get this funding will include being a Canadian citizen; these sources generally offer interest-free loans that are repayable when production financing is raised. Grant offering sources may restrict eligibility to auteur filmmakers. Increasingly, the funds also require that a producer have a track record of previously exhibited or broadcasted productions, or they may require co-production arrangements with established production companies. These funds, like all investors, are seeking to minimize their risk. By 62 mitigating their risk in this way investors are acting as gatekeepers that limit the ability of new talent to establish itself in the industry.

The most significant commitment to secure for a feature film project is a license agreement with a broadcaster or distributor. Distributors prefer to handle or at least control the timing of a broadcast window (a license based on time period and territory).

The reason for this is simply that distributors do not want a television broadcast to occur before the possible festival or theatrical exploitation of a film. The marketing strategy in this case would rely on building awareness using festival exposure for publicity and potential sales to other markets, as well as other post-theatrical sales. When this very important component of production financing is in place it likely will attract other investment. For example, it is the required minimum commitment demanded by Telefilm

Canada before it will devote financing as an equity partner. Another source is private investment is based on provincial and federal tax credit reimbursement incentives.

Once funding is in place, interim financing is needed to provide the production funds for license commitments. Since broadcasters pay only after broadcasting and exercising the license agreement, financing is required beforehand for funds to be received after. Some banks (e.g., Royal Bank and HSBC) and other financial institutions, such as the Rogers Telefund, will loan the required funds if all the production financing is in place along with negotiating fees and a re-payment schedule.

Presales

The benefit of "presale" agreements with broadcasters or distributors is that the agreement can be used to attract private investment or acquire a loan for production 63 funding. Many projects rely on several license agreements and advances from a distributor for pay television or syndication licensing in the U.S. The licensee acquires the rights to a specific window of exhibition or broadcast in terms of territory and time period, often with a clearly defined number of times the film may be screened or aired.

These rights granted to exhibitors or distributors are of keen interest to all licensees in terms of the inclusive and exclusive nature of the agreement. The license fee is paid in return for the right to air the production a specific number of times over a set time period in a specific territory under agreed terms and conditions for the sharing of distribution revenues.

The number of theatrical releases of feature films on the world market is growing increasing smaller. Still, features remain a driving force in the market due to the attraction of stars and big-budget blockbusters. The world market is still dominated by the American major studio blockbusters; the market share for domestic films in most countries is dwarfed by the U.S. productions. Increased interest in foreign cultures in many parts of the world is producing a market for foreign films, whether fiction or non- fiction. One of the driving forces is the increase in film festivals that provide audiences with an opportunity to see the work of filmmakers in different countries and cultures.

This to some extent is pulling the marketplace toward an awareness and appetite for foreign films. Even for U.S. majors, foreign market pre-sales may be a deciding factor in green-lighting a project. While pre-sales may not be a significant contributor to the financial plan, it nevertheless contributes to meeting the need of the budget.

64 Another investment opportunity can come from co-production and international treaties. These are complex contractual agreements. (For more, see "Global Economics,

Distribution, and Exhibition") According to the findings of the Canadian Media

Producers Association (CMPA), co-productions initiated by Canadian producers have decreased over the last several years from a high in 2000.

The international success of treaty projects like Cronenberg's Eastern Promises and the Television Series The Tutors demonstrates the significant potential of treaty coproduction to attract international audiences. Co-productions represent one of the best avenues for Canadian producers to create and finance films according to the CMPA's

2008 An Economic Report on the Canadian Film and Television Production Industry.

Canada has treaty agreements with 54 countries. The CMPA is urging changes to encourage and foster more flexible policies in this area, such as enhanced domestic tax credits to aid Canadian producers pursuing treaty coproduction agreements.

Private Investment

Equity investment may be sourced from funding agencies in the form of a loan with expected payback and some return on the investment. Private funding is also an equity investment, but comes with greater scrutiny of the money making potential of the

project and an expectation of some return based on domestic tax credits that may amount to a considerable percentage of the labour costs, as outlined above.

Certain traits make the profitability of a film more likely. For instance, a unique screenplay aimed at the widest distribution in all markets will tend to reduce the

investors' downside risk. Social issues may have universal audience appeal (e.g., Away 65 With Her (2006), by Sarah Polley - the story of an Alzheimer victim). While a film may have a more regional appeal and play well in one geographical region or country, the same film may find a wide audience if it has a universal appeal beyond cultural boundaries, e.g., City of Gods (2002) or Slumdog Millionaire (2008). Principal stars can attract distributor interest and result in optimum amounts being paid for television rights, while some stars may not attract attention for theatrical release but may have an attraction for television audiences (e.g., "old" Hollywood stars).

An established director and production personnel are of paramount importance in

"packaging" a film to give it "breakout" potential. Such personnel might include cinematographers (or a director of photography), production designers, art directors, editors, or musical composers, any of which may be award winners with a proven track record and the ability to produce quality work within the budget.

In order to complete financing, a completion bond and production insurance have to be in place first. Final negotiations for recoupment and contracts require legal consultation for and coordination of all parties concerned. The "recoupment schedule" describes the sharing of future revenues between the involved parties. The first order of deductions goes to the distributors or to sales agent commissions, followed by reimbursement for distributor expenses and talent residuals. These deductions are considered separately from the recoupment schedule. The distributor's funding advances would come out of the "producer's receipts" or the net receipts after the above expenses are paid for. The balance of net receipts is then disbursed to the investors. The usual practice in Canada is for government agencies to defer to private investors. When all parties have recovered their investment, the practice in Canada is for the investors to share 50 percent of the net profits while the producer retains the other 50 percent. This is the case unless the investment is a small percentage, for instance when most of the investment is from pre-sales. In this case, the producer would negotiate a profit sharing agreement. The producer has an obligation to report to each investor for the term of the copyright. After the first few years, the reporting is done on an annual basis.

The "cash flow analysis" projects the receipts and expenses over the phases of production. It is a projected balance sheet that itemizes all the expenses and maps the revenue installments ("draw downs") over the entire period of production, including pre- production (divided into bi-monthly periods), production (weekly periods) and post- production (bi-monthly). The cash flow analysis requires the production manager and the accountant to weigh the income that will come in installments from investors against expenses.

The "cost reporting" tracks expenditures against the budget to monitor variances.

The cost reports can also be used to predict overages or under spending during production. The cost reports are sent to investors and the guarantor on a weekly basis during principle photography and on a bi-monthly basis during pre and post-production.

The information used to establish the cost reports come from daily report sheets that are

prepared by the production manager or his staff during principal photography. These

reports include the cost of cast and crew and all related production expenses. The budget

items are listed in categories that include amount paid to date, payables, estimates to

67 complete and total costs against the original budget estimates. The resultant variance shows the difference between the actual cost and the original budget.

Interim Financing

A very important aspect of getting a film project completed is interim financing, or bridge financing. In many cases, funds representing presales, tax credits, deferrals, investments and other sources of funding are not immediately available and are contingent on certain events occurring before a producer can have access to those funds.

Many presale contracts stipulate that amounts due to the production company are not payable until the project is delivered, as is often the case with broadcasters and distributors. Meanwhile, money is needed to pay production costs, virtually all of which are due before delivery. Thus, a producer must turn to banks to lend the money needed to provide the necessary cash flow. Banks, in turn, consider presales and other contingent sources of funding as collateral for a loan.

An interim or bridge financier in the entertainment industry fulfills the role that the name suggests: it provides interim financing only. In order to be eligible for interim financing, a producer usually must have all financing sources necessary to complete the project already in place. Sources include pre-sale agreements with broadcasters and distributors, written commitments from federal, provincial and private funding sources and agencies and eligibility for Provincial and Federal Tax Credits. Before an interim financier will consider a project, the producer is required to present a detailed cash flow analysis, project budget, detailed calculations of estimated Provincial and Federal Tax

Credits and copies of contracts or agreements with various parties including broadcasters, distributors and equity participants. The information enables the financial provider to assess the bankability of a project by providing the assurance of sources of revenue or an investment sufficient to repay in full the bridge financing and complete the production is in place.

Another requirement usually imposed by interim financiers is errors & omissions insurance. This provides protection against various claims, including copyright and trademark infringement, invasion of privacy and defamation. Most financiers, broadcasters and distributors will not participate in a project unless this insurance is in place and these parties will be insured by the policy. A completion guarantee, or completion bond, is another requirement of interim financiers, broadcasters and distributors. Most interim financiers have a list of the companies that they will accept as completion guarantors. An interim financier will also require written commitments from all federal, provincial and private funding sources and agencies, as well as from all of the broadcasters and distributors involved. Most of these parties issue short form commitment letters and, later, longer form contracts.

Commitment letters usually contain expiry dates, and often include conditions that must be met before the long form contract will be issued and funds can flow. Interim financiers may advance funds before the long form contract has been issued; however, this decision usually depends on the financiers' relationship with the producer and previous experience with the third party that is advancing funds. The contracts with funding sources provide for payment by installment. Usually, the advance of funds will come in installments during the various phases of production (Hirshfeld 2004). Interim financiers encourage the producer to allow for a margin of delay in receiving payments.

In the past, the margin has usually been several weeks; however, in recent years, some financiers have encouraged their borrowers to allow for an even longer margin. Failure to allow for delays in receiving installment payments could mean a gap in cash flow and, in turn, additional strain on the production and the producer.

In order to provide the interim financier with the security that is required to advance funds, the producer will be required to sign a large number of security documents. These usually include documents creating a secured interest over all of the production company's assets, assignments of monies payable under various contracts with broadcasters, distributors and equity participants, assignments of federal and provincial tax credits, a copyright mortgage, the power of attorney and, generally, a guarantee signed by the individual producer and/or parent firm of the production company. The financier may also require consent to make inquiries to various third parties with respect to the project. The documentation needed for this is broad and far- reaching, but is intended to provide the interim financier with the security necessary to ensure repayment of the debt in the event that any difficulties arise. In most locations throughout Canada, bridge financing funds are advanced to the producer on a periodic basis. Advances are made after the financier has received certificates evidencing various stages of completion.

Co-ventures

Another business model is the co-venture that is essentially a dealmaker with a

Hollywood major and an independent domestic producer as a packager. A well-known 70 Canadian producer, Don Carmody, is a typical example of this approach aimed at getting film projects off the ground with major studio support. Carmody has been an independent producer and line producer of feature films such as Weekend At Bernie's

(1989), Sidekicks (1992), Johnny Mnemonic (1995), Chicago (2002), and Gothika (2003).

In addition, he has produced television and Pay TV projects. He has been involved with every major Hollywood studio and pay television network, as well as CBS and NBC.

Carmondy has become intimately involved in all aspects of tax shelter financing in

Canada, Europe, and Australia. He is familiar with most government co-production treaties as well as virtually all entertainment-oriented guilds and unions (CMPA biography, 2012).

There are many money-saving advantages to foreign location and service productions; most stem from the low expenses for crews, locations, and equipment rentals outside of Hollywood. In addition to these savings, a co-venture producer has access to tax credits and other incentives that make the project a viable proposition for an American major studio. While these films may use a good deal of Canadian talent, both behind and in front of the camera, they remain officially American productions by CAVCO definition because their financing is from the U.S.

Service industry producers can also do well by producing not for profit but for fees. For a line producer, remuneration comes from producer fees built into the budget.

Even if the project recoups nothing for the investors, the producer can expect their production fees. Where there is public funding such as tax credits, there is an added incentive for the studio or production company to take advantage of the opportunity. Added risk reduction is almost assured with Hollywood majors because their foreign distribution infrastructure can allow for the inclusion of independently produced films their block booking packages. Chapter 3

Legal and Business Aspects of Production

How, why and to what extent are there constraints and opportunities that predetermine the business aspects of producing a film? Regardless of the business model for a feature film, the producer faces constraints from a variety of legal and business practices. But these same legal and business practices present opportunities to exploit creative product potential; at the same time, they provide protection for authors and creators. Filmmaking is a collaborative art involving several disciplines; that necessitates laws and procedures to protect the rights of creators and to police the acquisition of rights from creators.

To examine the constraints and opportunities involved here, we must consider the business practices of organizations that function as the gatekeepers of the industry: funding agencies, financial institutions, broadcasters, distributors and exhibitors. The critical issue of risk management involves the participation of several professionals, including accountants and lawyers, as well as personnel from funding agencies and banks.

The function of a producer includes a great deal of document preparing, reporting and communicating.

The producer's role in feature films requires the entrepreneurial ability to develop a project and considerable management skills to see it through to the end. The producer needs both a screenplay and production management expertise to establish a preliminary budget. The producer will also need a corporate structure, legal and accounting council,

73 creative department heads and a variety of other essential personnel throughout the phases of production. The business structure for initiating a feature film requires the same elements that are required to launch any business, company or professional service. A feature film is structured as a corporation for the purposes of minimizing taxes, limiting liability, and making the distribution of income to investors as efficient as possible.

It is best to begin with the creation of a Business Plan that outlines the mission

and aims of the company involved in the development of the project. The business plan for an individual film project will include a financial plan, including a strategy to acquire funding, and a marketing plan including a strategy to exploit potential sales. A crucial

aspect of this financial plan is securing support for the development phase of the project.

Intellectual Property Laws

Intrinsic to any business model for a feature film project is securing the legal right

of the owner to exploit the property in various ways. The development of a project starts

with an idea, concept or story that is protected by what is called Intellectual Property

Law. When an original work is created in Canada, the creator automatically owns the

copyright. Issues of copyright ownership are very import to producers or filmmakers

because artists or creators from a variety of disciplines may be involved in a project.

Typically, there will be one or more artists, such as a musical composer, designer or

writer, involved. A producer must attain the copyright for the creations of these artists

with an agreement that demonstrates a "clearance" in the form of a license. These

clearances are essential to secure broadcast and distribution deals. All those involved in

74 the broadcast or distribution of a film could be liable if a lawsuit alleging copyright infringement is brought forth.

The notion of property in this case is similar to the concept used in real estate.

That is because the legal guidelines for intellectual property rights are derived from the legal concept of land or realty ownership. As in real estate, an owner may rent or lease intellectual property in the form of a license agreement. Because ownership of properties is the source of value, the entertainment and cultural industries are very nearly obsessed with the protection of copyrights. That obsession has only grown with the proliferation of media choices now available, which has created a greater need to mitigate the potential abuse of creator rights. Copyright refers the "right to copy" and provides the owner an exclusive right to reproduce, perform or publish a work. It also gives the copyright holder control over the use of a creation, as in the ability to benefit monetarily from the exploitation of the work. Copyright also protects the reputation of a work's creator.1

Copyright law is one category governing intellectual property. Other areas include patents, trademarks and industrial designs, in addition to confidentiality and trade secrets. Copyright law protects a diverse scope of creations, such as books, computer programmes, CD-ROMs, DVDs, web sites, and films. However, copyright does not protect ideas themselves. Only the expression of an idea is protected; that is, an idea for a book is not protected, only the creation of a book is. Once there is an expression of an idea in some tangible form, such as outline text that provides a synopsis of a dramatic film, Canadian law automatically grants copyright protection to the creator. A work is protected by copyright if the following criteria are clearly met: originality, fixation and the appropriate nationality of the creator. The criteria for originality means that the work must not be a copy, and the author "must use skill, experience, labour, taste, discretion, selection, judgment, personal effort, knowledge, ability, reflection and imagination" in the creation (Copyright Act, Department of Justice). Fixation refers to the fact that copyright protects the "form" in which an idea is expressed. As for nationality, only a citizen of Canada is protected under Canadian copyright law; this falls under federal jurisdiction and does not vary from province to province.

The Copyright Act came into force in 1924 and was based on the United

Kingdom's Copyright Act of 1911. Since 1924 several amendments have been added to the act, including changes in 1996, 1997, 2004 and 2010. But although there have been several amendments, few have had a direct effect on film producers. An exception is the addition in 1997 of the term "maker" (as opposed to author), which can refer to a person or corporation. The intention of this addition was to qualify "makers" as eligible for copyright protection; the change did not affect the status of authors. Maker, here, refers to "the person by whom the arrangements necessary for the first fixation are undertaken "

(Copyright Act). This generally applies to photographs and sound recordings. Thus, the producer of a sound recording may be a "maker" and thus, be the copyright owner of the recording. As a result the film producer must have a contract or license agreement with the maker of a sound recording. The rights for a musical score may be held by someone other than the maker, in which case the film producer must have a contract with the composer as well as the producer of the recording.

76 Regarding international copyright, if a work is protected by copyright in Canada as a signatory to the Berne Convention, then the work is protected in all Berne

Convention countries Responsibility for enforcing copyright law in Canada falls into two categories. Industry Canada is responsible for the Copyright Act, or the registration of copyrighted works. Industry Canada and Canadian Heritage are jointly responsible for policy development related to revisions of the Copyright Act.

The government does not monitor or enforce the rights of copyright owners.

Violations of copyright are dealt with in the courts, where the "criminal remedies" as set out by the Copyright Act are applied. These remedies can be as simple as an order to stop a specific infringement, or can result in monetary penalties compensating the copyright holder for loss (e.g., income, potential income, or reputation).

Determining who owns the copyright of an existing work normally requires researching the copyright data records. The producer must acquire a license from the copyright holder for use in a specific project or for use in a wider project like a possible adaptation to television, book, or other media. Exploiting or even copying a portion of a work can mean copyright infringement. There are ways to avoid copyright infringement, such as writing an original screenplay using your own ideas or creating an adaptation of a literary work that is in the public domain, and thus available to anyone to use as if they were the copyright holder. In Canada, an intellectual property is considered to be in the public domain when the work has existed for 50 years after the death of the original creator. This is also referred to as the "plus fifty rule." Other countries, such as the

United States and the European Union, have a longer duration of 70 years. Ownership of copyright can be researched through what is called the "chain of title." This refers to the documentation of every change in the assignment of rights from the original author to a publisher, screenwriter, producer or corporation. Some works may have been sold or licensed to other persons or companies and due diligence is required to find the owner of the copyright before an agreement for the rights to create a film or develop the property in any other medium can be secured.

An alternative to purchasing a literary copyright is to "option" a property. This allows a producer to make a small investment and provides a time period to develop a screenplay and test its marketability by shopping it around in pursuit of financing, casting or other creative involvement in the project. The option agreement requires a payment of

10 percent of an agreed price on an annual basis, generally for a two-year period. Once the required copyright is licensed, the producer may decide to hire a writer to create an original screenplay or an adaptation. When a producer secures the copyright to a property and then hires a writer to create an original screenplay, the producer will own the copyright of the finished screenplay since he or she has commissioned the work. The writer (usually from the Writers Guild of Canada) will then agree to a schedule of payments for their work. Once a film is completed, it has its own copyright. The producer, considered the film's maker, is the owner of the copyright until he or she sells the rights by assignment or license to a distributor or broadcaster.

What kinds of creations are eligible for copyright protection? There are many, but those relevant to filmmakers include musical works, sound tracks, sound recordings,

78 arrangements, adaptations, photographs, sketches and illustrations, fictional characters, joint authorship, collective works, and compilations (Harris 2001, 57-75).

Who owns the copyright when a work appears in various media? It is very important to gain clearances for various elements that may appear in a feature film, such as newspaper photos, quotes from books or articles, etc. The general rule is that freelancers are authors or makers and are thus first copyright owners. A release or agreement must be arranged for the right to use the work in question. However, staff employees such as writers or photographers do not usually have first copyright ownership, although they can stop the work from being used outside of the employer's media.

The rights of a copyright holder include the exclusive rights of the creator: the right of reproduction, the right of publication, the right of public performance, the right of adaptation, the right of translation, and the right of authorization. These rights may be licensed to others, at the discretion of the maker, in order exercise the right to exploit the copyrighted property.

Copyright law protects the economic interests of a creator while moral rights protect the integrity and personality of a creator's work. Moral rights are the sole right of the creator. These are considered "personal" rights that can only be exercised by the author or his or her heirs. Even if the author is no longer the copyright owner of a property, the original author still holds the moral rights. This also applies when the copyright owner is an employer; in this case, the employee that created the work retains the moral rights. Music rights are somewhat more complicated. There are rights for sound recordings that do not include the original author, or composer. First, there is a

"mechanical right" that insures the right to make any recording of a composition. The exception to this specific music right is those works that are in the public domain (e.g., the compositions of Bach, Mozart, or Beethoven). The right to make a sound recording includes a "synchronization right" that insures the right to match a sound recording with a picture to create a film or television program. These rights are perceived as separate permissions and are usually dealt with through a contract between the producer of a film and the producer or creator of a musical recording.

It is the producer's responsibility to secure the clearance of copyright for any and all created material produced for their own copyrighted work (the film). All clearances of copyright are absolutely required before a deal with a distributor or broadcaster can be obtained. Obtaining copyright for some works can prove to be a daunting task, especially when there is no single author or maker. In some cases, this may require seeking out representatives of authors or copyright holders that may be lawyers, agents or estate heirs.

There are organizations and copyright collectives that act on behalf of a variety of copyright owners and this makes it somewhat easier to obtain such rights. An example of this is the Canadian Screenwriters Collection Society (CSCS) which is a non-profit corporation created by the Writers Guild of Canada. The CSCS is able to claim, collect and distribute film and television writers' levies and monies entitled under the copyright legislation of European countries and other jurisdictions. Other collectives that a producer may deal with may include the Directors Rights Collective of Canada (DRCC) for the Directors Guild of Canada, the ACTRA Performers' Rights Society (PRS) for

ACTRA members, the Society for Reproduction Rights of Authors, the Composers and

Publishers in Canada (SODRAC) which administers royalties stemming from the reproduction of musical works, or the Society of Composers, Authors and Music

Publishers of Canada (SOCAN) which is a performing rights society that administers performing rights in musical works on behalf of Canadian composers, authors and publishers. Searching the Copyrights Registers at the Canadian Copyright Office is another means of finding copyright holders but because registration is not required in

Canada there may be no record of a given work.

Copyright Exceptions

It is possible to attain permission to use copyrighted property if the copyright owner cannot be located. In 1998 a procedure was introduced to allow users of copyrighted material to access such works. This requires applying to the Copyright

Board with proof that demonstrates the copyright holder cannot be located.

There are a variety of exceptions to copyright law in Canada; some are very clear and well defined while others may require litigation and a court decision. The one area of most relevance to a feature film producer is the parody exception. While it is not mentioned in the Copyright Act, a parody of copyrighted property may be excepted from the normal rules. However, parodies have been found to be in violation of copyright; decisions involving parody are made on a case-by-case basis.

U.S. copyright law is much more specific in this area; in the U.S. parody is covered in the "Fair Use" provision. Television programs like Saturday Night Live could not exist without the recognition of parody as a form of criticism or social comment. In

Canada we have what is termed "fair dealing," which is very restrictive when compared to U.S. exceptions. The guiding principle of "fair dealing" is that there must be "no motive of gain" in the use of copyrighted material used without permission.

What constitutes a copyright violation?

The legal term for violation of copyright used in the Copyright Act is

"infringement." One type of infringement is referred to as plagiarism, though this not a legal term. Plagiarism is the act of appropriating ideas, literary compositions, or any substantial part thereof, and passing them off as one's own. Plagiarism may infringe copyright in two ways: by violating the owner's sole right to reproduce a work, or by violating the moral right of the author or their personal reputation. It should be noted, however, that as ideas cannot be protected, it is the expression of the ideas that is protected. It is also significant to note that an original expression of an existing idea does not violate copyright. For instance, the idea behind an existing work—for instance a

vampire tale—can be used to create an original expression of that idea. For a film

producer a common infringement is the clear appropriation of, say, a literary work or part

thereof, without clearance and with a motive for gain.

Other infringement claims have appeared in relation to feature film production in

which research material has been identified by the author of the research as violating

copyright. For example, Ridley Scott and his screenwriter for The Kingdom of Heaven

were accused of using research material that an author claimed to be his sole original

82 property. In this case, an infringement was not confirmed by the court as it was demonstrated that the content was in the public domain.

One area of infringement that can be tricky is the "reproducing of a work or a portion thereof," especially when the expression of an idea comes very close to an existing work. Strictly speaking, only the author has a right "to produce or reproduce the work or any substantial portion thereof." There have been several cases of the "colorable imitation" of a work; this refers to a disguised reproduction of an existing work and is clearly infringement. When a "substantial part of a work has been appropriated" it is an infringement, but this is not always easy to determine. Each case of imitation or reproduction of a portion of a work is examined to determine whether the imitation is substantial enough to be considered a copyright infringement (Harris 2001, 169).

However, even subconscious copying may be found illegal, as in the case of George

Harrison's song "My Sweet Lord," which was found to be a substantial copy of the

Chiffon's "He's So Fine" recording.

An infringement charge will usually mean there is a commercial aspect to the

transgression, or that financial damage has been dealt to the copyright owner, who has the

sole right to gain from the work. The legal consequences of violating copyright law are

referred to as remedies and are imposed by the court. For a film producer, knowingly or

unknowingly violating copyright law can result in a film's prohibition from being

screened. This is usually due to lawsuits filed by creators, copyright owners or holders

claiming damages; remedies may be applied for other types of infringement. The courts

determine the appropriate remedies; those may be either civil or criminal in nature. A copyright holder whose rights have been infringed may seek remedies such as an injunction (e.g., a court order to stop infringement), damages, or accounts of profits.

Copyright violations may involve additional violations that include Criminal Code offences, trademark infringement, and privacy rights. A lawyer must be consulted to discuss the potential remedies and to what extent other offences are involved. To avoid incurring expensive litigation, costs an out-of-court settlement is often used to resolve infringement claims. When plaintiffs are successful in their claim, the amount of damages is established on a case-by-case basis. While this is not set out in the Copyright

Act, the court determines this amount. There does not have to be a proven intent to knowingly infringe copyright on the part of the violator; an "omission or negligence" may also result in a claim of violation, and this is why it is very important to be diligent in pursuing copyright clearance.

Electronic Rights

Due to the ever-increasing dominance of digital technology as a method for storage and communication, it is appropriate to examine electronic rights. This generally refers to digital media such as CD-ROM, DVD, web sites, and other internet-related rights. Electronic rights are governed under the Copyright Act and include the exclusive right to reproduction, adaptation, telecommunications to the public.

For the film producer, this means that any work created with the new media is subject to copyright law. Electronic rights protect interactive works in which there may be participation by users. These works may be online videogames or interactive movies

that allow participants to make choices in accessing the material. Ownership guidelines and duration of copyright is the same for digital works as it is for traditional media in

Canada (Harris 2001, 225). However, the nature and scope of the rights being licensed must take into consideration the potential adaptations or manipulations that a digital work may experience. In licensing a work's electronic rights, the consideration of the forms a work may take on is quite different from traditional media such as film, in which exact duplicates are distributed to theatres for exhibition. A digital work is likely to become part of a grouping of works, or manipulated to become part of another work in some other way. Thus, the negotiation and contractual agreement of rights for a digital work might involve approving the specific materials included within the packaging and distribution of a work.

A work may be distributed in various formats when it is an electronic product; for instance, it might be released as a DVD, via the Internet as streaming video, or via some other medium not yet invented or in use. For film producers the licensing of electronic rights has many potential complications due to the changing nature of digital technology.

This situation can work for and against a film producer. Copyright holders would do well to specify the platform(s) that an agreement includes, and "reserve all rights not granted"

(such as future technology) in contractual agreements. At the same time, a producer must ensure they have the rights to the use of a work on the platforms in which the work may appear. Another consideration is the distribution of the work, whereby rights may account for a variety of electronic media that will appear in the future and might be able to bypass stores or the Internet.

85 The duration of copyright granted to electronic rights is another important issue for a producer to understand. Limiting the span of a license to less than the full term of the copyright may provide an opportunity to exploit new media as yet unknown. As in the case of traditional media and distribution, the copyright holder should consider whether they are granting exclusive or non-exclusive rights. Again, an opportunity to exploit a work in other media in the future may present itself, and if exclusive rights have been given away, whoever is the current copyright holder will have the opportunity to exploit the work. Geographic boundaries also apply to electronic rights, just as they do to traditional distribution such as theatrical exhibition or broadcast rights.

The value of electronic rights and the structure of payment involved is still new territory in copyright law. These continue to be negotiable while most traditional media has well-established standards of payment in terms of percentage of payout and acceptable fees. But organizations representing performers like actors, musicians and composers have renegotiated fee schedule contracts with producers, keeping electronic media at the centre of negotiations to account for what may ultimately be the future distribution method of many works.

Clearing rights for the use of digital products is similar to clearing rights for non- digital works. Copyright collectives have found new opportunities in dealing with digital copyright clearance for various artists and creators; many existing collectives have developed the capability of providing electronic rights in addition to traditional media. In fact, there are many business people currently capitalizing on the opportunity to provide rights for a variety of end uses, such as reprography (the reproduction of graphics through mechanical or electrical means) and retransmission. Many collectives have also expanded their collective representation to be a "one-stop clearance," servicing various types of creators, from musicians, to photographers and writers (Harris 2001, 236). With the ease of transporting digital material, enforcement of copyright on the Internet has proven to be challenging at best, but new models of distribution have and will continue to appear. For instance, digital signatures are coded into digital film masters to track products to the origin of encoding and thus discover copyright infringers at the source

(Lasica 2005, 29). A number of technologies have emerged to curb digital piracy, including encryption, tagging (the use of a copyright notice or message encoded into the work), watermarking (possible detection of a counterfeit copy), and conversion/anti- copying (transcoding a work into a form that cannot be edited or altered).

The near obsession with copyright has created a potential nightmare for producers of documentary (non-fiction) film because of their extensive use of existing work or quotations. While there are similar issues for feature film producers, it is less of a problem because most of the content in a feature film is likely to be fiction or fictionalized.

Trademarks

A trademark provides the owner the exclusive use of that mark. A word, symbol, picture, logo, design, the shape of a product or a combination of these elements may constitute a trademark. Trademarks may be registered or they may be protected by common law if the product or service has been acquired through use (i.e., using a mark in connection with a service or product). The benefit of a trademark for a film production company comes from the "branding," or recognizable identification of products by use of the mark, which helps establish a reputation and good will toward the company.

Registered protection lasts for fifteen years in Canada and is renewable indefinitely for a fifteen-year period (Smyth, Soberman and Easson 2007,458). Unlike copyright, a trademark registration must be obtained in other countries.

The most common violation of trademarks is referred to as "passing-off," or misrepresenting the goods, services or business of another person(s) and causing damage to that person(s). Remedies for infringement of trademark by passing-off in the film industry are rare; however, any attempted use of a fictitious character must be cleared in terms of trademark rights to avoid potential infringement. As with copyright, trademark rights provide for the legal exploitation of trademark entities by assigning or licensing a trademark, in addition to the franchising of trademarks (Smyth, Soberman and Easson

2007, 459-460). An example of the proper use of trademarks in this way is a Disney character from an animated movie that is reused as a toy.

Insurance

Quotes on the insurance required to carry on business in film production should be researched early in the pre-production phase. Insurance is required to cover the director and the cast. This insurance can be restricted to the actors most essential to complete principle photography within the schedule and on budget. Liability insurance is necessary to cover property damage, loss as a result of accident, or injury to persons on the set. Other insurance may include aircraft, boat, or auto coverage. This insurance cost 88 can vary considerably and the producer should explore all the possibilities to mitigate the cost by limiting the risks involved in the use of props and other aspects, such as on-set special effects. Insurance as generally practiced in the motion picture industry covers the following: the death, injury or illness of the director and principal cast members; the loss or destruction of the master negative or to sets, props, wardrobes, and other equipment; faulty stock or cameras and defective processing; liability to third parties for death and personal injury and for damage to property; and, finally, errors and omissions as relates to copyright infringement, or libel and slander.

Investors, as owners of a film, are potentially liable to third parties under the infringement or invasion of privacy claims (see below) and, as such, are liable for all obligations in connection to the production and exploitation of the film. While insurance limits their exposure, some liability does remain for investors (McQuillan 1980, 41).

Insurance referred to as "errors and omissions" (E & O) is essential. E & O is often

provided by a company that also provides replacement, damage and liability insurance for

principle photography. This insurance protects the producer against errors or omissions

in the rights clearance process that may result in copyright infringement, libel or

defamation. The typical release requirements for E & O insurance includes a list of about

20 items docked for "clearance procedures" (See Appendix A for details). This could

include property names or logos seen in a film that may be construed as being defamatory

in context. The insurer or distribution company will provide an outline of the clearance

procedures required for an E & O policy. Generally this includes a "chain of title" form

for each item requiring copyright clearance (These items and the related legality are 89 covered in the segment above on copyright.). Normally a chain of title document will be required for submission to distributors and broadcasters.

The Completion Guarantee is a form of insurance that is a contractual agreement generally used to protect the investors in a feature film project. The completion guarantor ensures that a production will be completed and the product will be delivered; the guarantor will require the script, crew and cast lists, final budget, call sheets, daily production reports and weekly cost/cash flow reports in order to monitor the schedule and budget of the project (Calfazzo and Barrett 1995, 314). The guarantor is obligated to provide whatever resources are needed to complete the film, in accordance with all the project contracts. The potential downside of such an arrangement is that the producer can lose the project to the completion guarantor if the guarantor deems that the producer is an impediment to the completion of the film.

In the event that the completion guarantor assumes control, he or she may require that the executive producer, producer and director defer receipt of a portion of their fees, after exhausting all other items in the budget, until the completion of the film (McQuillan

1980, 39). The completion guarantee normally stipulates that the completion guarantor cannot recoup any sums until the investors have first recouped the full cost of their investment. After the participants have recouped their investment, the completion guarantor is entitled to be reimbursed (Ibid., 40).

Canadian Certification

A Canadian production must be certified as such by a government agency. The formal certification system for a "Canadian Content Certificate" is operated by the 90 Canadian Audio-Visual Certification Office (CAVCO) of the Department of Canadian

Heritage or by the Canadian Radio-Televisions Telecommunications Commission

(CRTC). The CAVCO certification system offers tax credit incentives to producers.

Certification is available for a production that has a Canadian producer, has 6 points out of 10 for key Canadian personnel, spends 75 percent of labour costs on Canadians and spends 75 percent of processing costs in Canada. CAVCO will certify productions that are formally recognized by Telefilm Canada as co-productions between Canadian producers and producers from countries that have treaty agreements with Canada.

The CRTC system is used for productions that will appear on licensed Canadian television. Since broadcasters must meet Canadian content regulation quotas, qualified

Canadian productions could have favour over foreign production. While the CRTC recognizes CAVCO certification, CAVCO does not recognize CRTC certification.

However, this is not an issue for feature film production because CAVCO certification is required for tax credit purposes and will mean certification for a broadcast license.

Telefilm Canada is known to use its clout to ensure that the minimum Canadian content requirements are exceeded, thereby giving its support to predominantly Canadian projects.

Business Structures

Incorporation is the most common business structure used in film production. The greatest advantage to incorporation is the limited liability it allows. Since the corporation

is considered a legal entity, it is only responsible for it's obligations up to the value of its assets. This means that the personal assets of the owners of a corporation are separate from the business. In fact, it is very difficult for a creditor to successfully make a claim against a corporation owner's personal assets in order to fulfill the obligations of the corporation. The owners of the corporation are the shareholders. There is also a board of directors, which appoints the officers of the company that carry out the day-to-day operations of the business. No matter how many owners there are, the structure is the same. Most corporations in the film industry are private; that is, they have few shareholders and their shares are not available through the stock market (Calfazzo and

Barrett 1995, 297.

A common practice in the film industry is to establish a separate corporation for each major feature film project. There are a few reasons for this practice commonly referred to as a "special purpose corporation." Firstly, it limits exposure to claims against an individual project to the special purpose corporation, thereby protecting the parent corporation and other projects. Secondly, this protects an individual project from any liabilities issuing from the parent company; this is very important to the investors in a project. In addition, this arrangement separates the financial and commercial affairs of the project from involvement in those of the parent production company.

Another form of business structure used in the film industry is the limited partnership. The major requirement of this business structure is that there must be one or more general partners. A general partner is responsible for the operation and management of the partnership and has unlimited liability. A limited partner, meanwhile, has liability limited in regard to their investment in the partnership. The main advantage to this is the fact that the partner's, or investor's, liability is limited to the amount invested in the partnership. A partner "is not liable for debts, obligations and liabilities of the partnership or any partner arising from negligent acts or omissions that another partner, or an employee, agent or representative of the partnership commits" (Smyth, Soberman and

Easson 2007, 579). This form of business structure is a vehicle of choice for tax shelter finance.

Another common film production business structure in Canadian filmmaking is

the "joint venture." This structure is often used because financing feature films often demands funding from several sources. Co-production or co-venture refers to a structure in which two or more corporations join together to produce a film or television production. This structure is similar to a limited partnership in that the liabilities are

limited to the investment of each partner, or an equity joint venture.

93 Chapter 4

Global Economics, Distribution and Exhibition

To better understand the position of Canadian-produced feature films, or in particular the position of those produced in Ontario relative to the global economic market, one must first consider the feature film as a cultural product. Are cultural products and industrial commodities equivalent in the context of global economics? Peter

S. Grant has pointed out that cultural products are bought and sold and respond to the forces of supply, demand, and competition (Grant and Wood 2004, 43). In other words, a vital marketplace for cultural products inarguably exists. Although, there is a constant flow of all kinds of popular cultural products around the world, the film and television industry is unique in its ties to global trade.

To examine the similarities and differences between cultural products and industrial commodities, consider the following question: what are the opportunities and constraints for Canadian feature film producers? Given that cultural products are obviously different from industrial commodities in terms of what they provide to the consumer, why exactly do cultural products confront a different set of circumstances when encountering foreign markets? What forces are currently constraining the expansion of markets within and beyond the Canadian borders? While our neighbors to the south do welcome the importation of some manufactured products America's world dominance of global cultural markets such as feature films, television programming or popular music has several characteristics that mirror the corporate conglomerate behavior usually found in the industrial manufacturing sector. Given that reality, what are the dynamics of the relationship between the American and Canadian film and television industries? What is Canada's relationship to the industries of other countries, such as The

United Kingdom, or to the European Union? What are the opportunities and constraints involved in co-production treaty arrangements that are increasingly seen as a viable tool with which to combat the hegemony of American media conglomerates?

To begin, consider what distinguishes cultural products from industrial or commercial products. David Throsby has assigned the following characteristics to cultural products: the involvement of some form of creativity in their production, the generation and communication of symbolic meaning, and their being embodied in some form of intellectual property (Throsby 2001, 4). To put it another way, cultural products are produced for non-utilitarian ends, usually enjoy copyright protection, and generally involve some aspect of design, story-telling or some other intellectual raison d'etre related to creating an experience or an interpretation. Or, a cultural product could simply be defined as a source of entertainment. Thus, cultural goods must be differentiated from other economic goods because cultural products must be experienced in order to be valued (Florida 2005, 3). A cultural product has a value not for what it is, but for the experience it conveys. On the other hand, industrial or commercial products are consumed. Intellectual properties are not consumed in the same sense and their use by one person (or for that matter, one corporation) in no way limits its use by another (Grant and Wood 2004,48).

Throsby also identifies cultural products as providing a range of cultural values.

These include aesthetic value (i.e., style, fashion, taste), spiritual value (i.e., understanding, insight), social value (i.e., identity, compassion), historical value (i.e., connections to and continuity with past), symbolic value (meaning); and authenticity (i.e., originality and uniqueness) (Throsby 2001, 28-29).

Thorsby presents a viable basis for considering the economic value of cultural products. The consumer of such goods will inevitably attach an economic value to a given product and determine an acceptable price for it vis-a-vis one or several of the values listed above. If consumers of cultural products do not make their own evaluation, they often accept a value determined by "experts" such as reviewers, critics, etc. While these factors establishing value are valid and applicable to the products readily available to the public, there are often constraints on the availability of goods that effect their valuation.

However, questions remain: is consumer sovereignty as much or more restricted in relation to cultural goods when compared to ordinary goods? How are consumers controlled? In answer to these questions, it must first be established that "gatekeepers," such as distributors and broadcasters that are guided by economic agendas dominate the marketplace of popular culture (Grant and Wood 2004, 50-51). For example, the films that get produced by the American major studios are chosen based on their reliance on previously successful content, in addition to "safe," or risk-avoiding, marketing pleasers like popular movie stars, directors and producers that can be counted on to draw an audience. Many films are written and created for popular actors who have "opening power," or the ability to attract a very large audience on the opening days of a feature film, in particular one meant to be a blockbuster. To recognize this trend, one only need notice that the order of the day lately has been sequels or recognizable franchises and brands; the major studios are intent on pumping out the same titles, stars and directors over and over again. In the end, it is all about marketing and, if possible, global marketing geared solely to produce the largest and widest audience possible.

So what real choice does the public have in the marketplace of film and television programming? The gatekeeper's highest priority is to maximize profit and this alone precludes them from releasing films and television programming that might serve the public interest by offering the public the best work instead just that which turns the highest profit? Conglomerate agendas dictate choice with an ever narrowing and more focused formula designed to minimize risk and maximize profit through structure and control of distribution and exhibition. (See Appendix B for a list of Golden Age studios and a matrix of the current conglomerate ownership of the original movie producing studios of Hollywood.)

While there are certainly films that can be described as "art," the film industry in

Canada is generally associated with theatrical cinema or film that is intended for consumption as television programming. Filmmaking intended for television includes movies-of-the-week (MOW's) or episodic series. Documentaries, animation and shorts are considered as part of the film industry category when they are accepted by the gatekeepers and represent minimal risk and maximized profit. Commercial films and episodic television programs represent the prime cultural products in the global marketplace.

97 A significant difference between cultural products and ordinary commodities is in the setting of price. The prices of cultural products can vary from market to market with no direct relation to the original cost. As Grant and Wood established in Blockbusters and Trade Wars, the cost of producing a feature film eliminates most would-be competitors because they cannot take on the huge costs and risks involved. Yet, once the expenses are recouped, profits are realized no matter what the pricing of copies, whether that is through the syndication of a series on television or the sale of DVDs of a feature film.

Copyright law permits owners or licensees to exploit a property and that encourages them to sell the same goods over and over in different markets, regions or territories at rates that yield the highest possible return; this is often accomplished by undercutting local producers and content providers. This is certainly the case in regard to

U.S.-produced films, and in particular television programming that enters Canada via privately owned Canadian networks. Most cultural products like feature films, fail to achieve commercial success because it is virtually impossible to predict success or failure before a theatrical release. Even with positive audience testing and great acclaim at festivals, feature films have a habit of disappointing at the box-office. Thus, the risk is considerably higher for this type of cultural product. However, the rewards of box-office success for a feature film are often much higher than is possible with ordinary commodities. Cultural products do behave similarly to other commodities when the property at hand has wide appeal in a large market. If a film project has a potential wide appeal, that project is far more likely to get a green light for production. Most major studio feature film products are designed for minimal risk, the largest market and the highest returns.

Another significant fact is that trade policies treat cultural products as if they were industrial commodities. Recent major developments in international trade include negotiations under the General Agreement on Tariffs and Trade (GATT), the World

Trade Organization (WTO), the North America Free Trade Agreement (NAFTA), the

Organization for Economic Cooperation and Development (OECD), and the Multilateral

Agreement on Investment (MAI). Cultural products play an important role in the international trading system established by these agreements; in entering the global economy, cultural products constitutes a significant economic contribution to the national economy of a country. This is most notable in the case of the United States, the largest exporter of cultural goods in the world (Throsby 2001, 131). The U.S. has a surplus trade

balance in relation to every country in the world when it comes to cultural products. No

other enterprise earns the U.S. more money that its creative industries. According to

UNESCO's estimates for 1997, 388 million Europeans watched at least one of some 480

Hollywood films. In contrast, only 53 million Americans saw European films. American

films dominate cinema screens in Europe, Canada, South America and much of Asia

while movies from the rest of the world are rarely seen in the US. Of 30,000 movie

theatres in the U.S., only 250 regularly screen foreign films (Grant and Wood 2004, 134).

However, there are issues that are important to a state aside from the purely

economic imperatives driving global trade. Imported culture, as Throsby points out,

brings with it symbolic messages that may be seen as a threat to local cultural identity 99 even if, on the other side of trade negotiations, the distributors of cultural products only see the potential exploitation of lucrative markets (Throsby 2001,131). While attempts are always being made to reduce protectionism and insure free trade in global markets, countries like China and others want to control the cultural products entering their country to protect against threats to national identity; this is done despite strong consumer demand for American products.

The fear of infection through foreign cultural influence is particularly intense in both France and Canada. These two countries have argued for a cultural exception to be included in trade agreements affecting them because both countries fear dominance from the U.S. in this area, particularly in film and television media. Content quotas have protected Canada from the complete dominance of relatively inexpensive programming or film productions from the U.S. Canadian broadcasters can buy American-produced episodic television for a fraction of the cost of original domestic programming produced here in Canada.

On the other hand there are those that decry the restrictions on choice that quota policies and other constraints enforce on the consumer. But regrettable as this might be, it may also be necessary to protect the domestic industry and the jobs of a variety of artists, craftsman and others. The potential impact of foreign dominance in terms of content varies widely according to the media in question and has managed to affect policy change in the past. As noted in previous chapters, a Canadian product is defined in terms of a points system that reflects the personnel involved as well as type of production.

100 Other factors continue to produce economic benefits for Canada, such as the well skilled workforce of the Canadian film industry. Throsby highlights the potential benefits of cultural industries in this century, citing an increased demand for cultural goods and services due to rising incomes and changing patterns of consumption. He adds that there will be an increased need for content providers to service the new information and communication technologies that emerge. Therefore there is already a need to foster creative thought and expression to spur innovation and technological advancement. In addition, cultural industries are important because they may create employment potential to replace declining sectors of the economy such as industrial labour. But aside from the economic dimensions of the creative industries, we must take into account the broader

role of culture as a means for people to express identity, communicate and otherwise interact in the public domain.

There is an agreement within GATT that compels member countries to treat goods from other countries no less favorably than like goods from the domestic market. But

there is also a provision providing for screen quotas for "films of national origin;" this is

designed to protect domestic films from the hegemony of the U.S. majors. While there is

no definition provided by GATT as to what might constitute "films of national origin,"

most countries like Canada use content rules based on a points system to define a national

film. These point system's most significant requirement is that economic and creative

control must be held by domestic interests for it to be considered a film of national origin.

For instance, feature films in Canada must be made using a domestic producer, director,

on-screen talent, screenwriter and local labour in a variety of other key creative positions 101 before gaining certification and access to the benefits of a broadcast licensing, tax credits and other benefits. The same is true for France, the UK and many other countries. Most importantly, the economic control requirement demands copyright ownership, with which come the rights to exploit the property throughout the territories of the world. Also, for both domestic production and international co-production treaties, content quotas for economic participation, required expenditures in given jurisdictions and a variety of other requirements including local labour expenses must be met before certification as a

Canadian film is awarded to a production.

In 1994, the WTO established the Agreement on Rules of Origin. The general principle of this agreement is that the "origin of a particular good" should be either the country in which the good has been wholly obtained or the last substantial transformation has been carried out (Grant and Wood 2004, 150). Using this definition, many

"runaway" Hollywood films, being made in Canada with the assistance of Canadian crews, post-production facilities and with screen prints made in Canadian labs would be considered Canadian films. Obviously, this would be a ridiculous scenario if applied to cultural products even if it is reasonable in the case of common industrial products.

The notion of film as a means to establish national identity requires the use of local public culture as content and makes this notion a far cry from the Hollywood model.

While there are independent filmmakers in the U.S. who focus on local culture and issues of civic concern, these films are not going to be distributed by Hollywood distributors on the basis of their domestic drawing power. In fact, while Hollywood has become increasingly preoccupied with using the global market to insure a return on investment, it has also tightened its hold on the domestic market; that is, the generic, non-local blockbusters Hollywood continues to produce play as well in Pisa, Italy as they do in

Peoria, Illinois (Ibid., 147). Examples include Titanic (1997)or Armageddon (1998), both of which had global appeal and little or no definitive local setting. Even Canadian made productions are set in "anywhere" so that the appeal is not localized and so they can be more easily marketed in the U.S. and other markets; a case in point is History of Violence

(2005), directed by David Cronenberg.

The context of these films is made purposefully unidentifiable so that the audience is not distracted by the local environment unless of course it is an integral part of the scripting. One such recent feature film, aided substantially by star power, is Babel

(2006). That film uses a variety of locals in different countries including Morocco, Japan,

Mexico, and the United States to establish a quasi-universal, or global, appeal that is married to a synthetic and thinly woven story structure. That is not to say that locally identifiable films cannot be successful and enjoy commercial success, but that these films are independent productions and generally must do without major distribution support.

Those that do manage to get major distribution deals are usually the ones that have recognizable stars involved that make the film marketable.

In the international trade of cultural products, and particularly as regards film and television, the U.S. has advantages in terms of access to scale and other economies that no other competitor comes close to possessing. The U.S. distributors of television programming make money no matter how low the price they charge for use. The reason for that, as explained by Peter S. Grant and Chris Wood in Blockbuster and Trade Wars, is the fact that there is so little cost associated with the copying and shipping of a product once the production costs have been recouped. With such an inexpensive and endlessly available product, U.S. distributers can undercut any local programming anywhere in the world. This makes the television marketplace unlike any other conventional media market.

In the ordinary industrial goods market, expenses mount due to the material and labour required to produce the items. But cultural products like DVD or television tape copies are essentially paid for up-front and can be reproduced at minimal cost. When

Grand and Wood point out that "audiences do not decide what television programmes to buy and put on the air it must be noted that the decision is based largely on monetary concerns like the cost of domestic production verses the cost of purchasing existing programming, which comes mostly from the U.S. The theory put forth in Blockbuster and Trade Wars is based on the fact that the long established major film studios of

Hollywood, now owned and controlled by a small number of huge conglomerates, are able to bankroll the high initial cost of feature films. But not only are they able to source capital, they can do so from within their own vertically and laterally integrated structure, which includes other media used to promote, advertise, merchandise, publish, distribute and exhibit their product. The major studios alone can afford the large sums for

"opening" screen talent such as a Jim Carey or Tom Cruise. The costs rise even further when you consider that the marketing budgets that are required to promote and advertise these films are as large as the huge production budgets themselves.

104 Opportunities and Constraints of the Canadian feature Him

What constitutes a national cinema and how do we identify a Canadian feature film? Charles Acland directs us to Andrew Higson's consideration of the "idea of national cinema". Higson proposes that a "national cinema encompasses not only the structures of production but also those of consumption" (Acland 2003, 32). Government policy enforced through funding agencies and certification rules determines the course of national cinema based on the control of creative aspects, the exploitation of the work, and the determination as to whether the principle funding source of a film qualifies it as

Canadian. While funding agencies spend much effort deciding what is Canadian, it is clear that audiences do not choose to see films based on national patriotism. If they did,

Canadian feature films would be top box-office winners in Canada, but in fact Canadian films garner on average barely 3 percent of screen time across English Canada, although there are more positive results in French-speaking Canada, at 18 percent or more due to a domestic star system and cultural support of Quebec film and television. English speaking audiences in Canada like elsewhere in the world have clearly preferred

American commercial film for many decades.

What are the opportunities available, given that a strong and independent

Canadian film industry has never developed into a self-supporting industry? The

Canadian film industry continues to thrive on a branch plant model serving the runaway production of the Hollywood major studios, as well as on some domestic feature production. Most domestic film production is for television or mini-series. With a work

105 force of over 48,000 at its peak, the Canadian film industry has skilled workers, most of whom are active in the creative and technical job positions.

The foreign location production service model is a global phenomenon, with several countries benefiting Hollywood's desire to reduce production costs that have risen due to escalated salaries for domestic technical crews, the high cost of post-production facilities and skilled labour, and the fact that most on-screen talent costs more than many countries can afford to devote to an entire production budget. Canada has had a long relationship serving the runaways. The Vancouver area and British Columbia in general has been a favourite site for American features. The American producer and TV production developer Steven Cannell built a studio in Vancouver to service his own and other Hollywood productions. The production centre continues to be a state-of-the-art complex and has been home to TV shows for several years. The combined appeal of highly skilled labour at cheaper rates, less expensive equipment rental costs, tax credits on labour expenses, local government assistance to access locations, accommodations and other services all provide incentives to continue using a runaway production model. As the American dollar declines and reduces the advantage of a cheaper Canadian equivalent, this becomes seemingly less attractive; but the high cost of star power actors requires cost cutting wherever possible.

The competition between Canadian cities and regions offers added incentives to the Hollywood majors to continue working with this model and allows hundreds of millions of dollars to flow into the Canadian economy. Meanwhile, countries in the southern hemisphere, including New Zealand and South Africa, attract runaway 106 production during the North American off-season. Competition from Eastern Europe has also increased, with inexpensive locations for shooting available in Romania,

Czechoslovakia and Hungary. Despite the competition, Canada has hosted as much as

40% of the foreign location and service business from Hollywood major studios in recent years, although it has been greatly affected by the recent strength of the Canadian dollar and so has diminished of late. There is plenty of work when the Canadian dollar is weak but when times are tough the work force either moves to greener pastures, or skilled workers are lost as they take up other trades in order to survive.

Cultural Products: Global Versus Local

Cultural commodities such as film and television are economically defined in terms of production and consumption. Nations use quotas to control the influx of such foreign products and to protect the corresponding domestic industries from erosion.

While these measures have not proven to be successful to any extent in most countries, their implementation in the television industry in Canada has had a much stronger impact.

The controls have resulted in greater domestic production and the impact has meant a great deal of Canadian television exports to other countries. Why would television production succeed where cinema has failed? One policy tool that has helped significantly is the Canadian content quotas enforced by the CRTC on Canadian broadcasters. The programming quotas have been a positive factor because they have provided greater choice to the public. An example is children's and comedy programming for TV that is produced in Canada and exported worldwide. The inclusive approach guarantees the shareholders of Canadian productions some return on the investment made through 107 federal and provincial funding agencies; that return, in turn, creates more opportunity for development and further production, creating a positive cycle of investment. Public and private broadcasters have both benefited from the policy tools that have built a growing and stable industry.

The sale of Canadian television programming throws the relevance of cultural specificity into question. The concept of "cultural discount" is a claim made by several authors that films or programming with cultural specificity do not last long nor travel far in the global market as compared to one with "degree zero" particularity (Acland 2003,

33). Degree zero refers to the Hollywood model that aims for transparency, or the use of narrative structures and characters that allow other cultures to read meaning into, and apply their own meaning to a given film. This may be giving the major studios more credit than is due, but as is proven by the Canadian TV programming that has traveled so easily to other parts of the globe, there are universal aspects of human character that transgress the boundaries of nationhood and cultural identity. Surprisingly, the shows that have proven this are purely Canadian icons like Kids in the Hall, The Trailer Park

Boys or Corner Gas which have international appeal for other English speaking countries with similar cultural fabric such as Australia or New Zealand. The concept of cultural discount provides an economic rationale to explain the failure of Canadian films on the global market by explaining that foreign audiences do not appreciate cultural specificity.

However, the concept fails to explain why feature films defined as Canadian do not have

"legs" in the global marketplace, while the success of these television programs are no less culturally specific. Horror and slasher films made in Canada have had considerable 108 success abroad, but they are not Canadian movies as defined by policy and content ruling criteria. Aiming for the lowest common denominator may draw an audience but that is not an accurate measure of local or global culture, but a consideration of the profit- motivated producer. Star power may have something to do with the reception of

Canadian films abroad but it may also be that, unlike American movies, many Canadian films are developed with original scripts and do not do well. Meanwhile, Canadian films that are adaptations have done reasonably better in theatrical release. For instance, adaptations of works by authors such as Mordecai Richler, Michael Ondaatje and others have had international success.

The U.S. film and television industry is organized as one industry, the

"entertainment industry." As the authors of Global Television and Film indicate, the same struggling equivalent industry in other countries is generally identified as the

"cultural industry" (Hoskins, McFadyen, and Finn 1997, 20). What these culture industries are missing that the U.S. entertainment industry has is distribution.

Distribution is the key to further production. With no distribution there is no means to produce a flow of money back to production. Guaranteed distribution to the entire world and ensured exhibition is the fundamental key to the Hollywood major studio risk management strategy. For the seven major studios and the hundreds of independent filmmakers this is the single most significant component to the perpetuation of the

American dominance of film and television worldwide.

109 Film Distributors and Exhibitors

If there is no distribution and exhibition of a feature film, the filmmaker will not likely be making another feature. The life cycle of film and television products is short.

A theatrical film passes from the producer to a distributor, and then is rented to exhibitors in various countries or regions of the globe. The US theatrical release of a feature film on average will end within six months (Levison 2007, 74). While US major studio films begin with a wide release opening on thousands of screens, US independent films start slower and build. An example is My Big Fat Greek Wedding (2002), incidentally a film made entirely in Canada but with American money, which started in a small number of theatre across North America and as audiences responded to the film it was given wider release (Ibid., 74). Independent films gain popularity from word-of-mouth and media reviews. This is very much the case with Canadian films, since they are all independent films. The films may increase in exposure as people tell friends and acquaintances about the film, and newspaper and web reviews pass judgment on films. The average Canadian feature film will last on screens for the first weekend and maybe a week.

Typically a Canadian film is in competition with US major studio productions and independent US features, and to a lesser extent with a smaller number of foreign films.

This is a very significant factor when you consider the funding of US studio films or even

US independents that usually have some star power increasing the funding potential. In comparison to Canadian films that receive government support, these US films also often have proven marketing components with exposure in other media. There is no mechanism in place to protect Canadian films from this competition in the marketplace. 110 Adding further is the likelihood that the Canadian film is an auteur project with performers who have little or no marketable potential.

The Canadian distributor is guaranteed to recoup at least some of his meager marketing investment form Telefilm and can use the theatrical exposure as leverage in ancillary sales. The Major Studios and the Hollywood marketing machine view the entire

North American continent as one market. The well known international entertainment magazine Variety is a weekly that reports on theatre attendance and reports overall numbers that include Canadian cinemas that are running American films but without distinguishing them from US theatres.

The flow of the money starts with the distributor at the top of the producer food chain, since all of the money comes back to the distribution company first. The distributor's expenses come off the top before anyone else including the producer or investors in the film. Of course this applies to any business model whether it is a wholly independent commercial film or government supported. The distributor's expenses are generally what is referred to as P&A, or print and advertising. The distributor pays the cost of prints or digital copies that go to the individual cinemas, in addition to ads that are likely restricted to newspapers in Canada. The distributor's expenses will also include fees that are a percentage of all revenue plus miscellaneous fees that may include hiring publicity expertise for local exposure of the director, preview screenings and other publicity related expenses. The box office receipts for films are divided into exhibitor and distributor share. The average split is 50/50 between the distributor and exhibitor, although the weekly split may differ with the exhibitor starting with a much larger share 111 (80%) in the first week(s) and the share goes in the distributor's favour the longer the run in the theatres. However, other revenues are added to the distributor's income as they flow from ancillaries such as video rentals (DVD), television and foreign markets

(Levinson, p71). After the distribution company has recouped the P&A cost and taken its fees (typically 35 %) the producer will receive the remaining money as it flows in. The investors and producer are paid a 90/10 or 80/20 split in the investor's favour.

The projections for the future remain optimistic for the distributor but for the conventional exhibitor the indicators show declining revenue, while projection for home video, pay television, video-on-demand (VOD), and ancillaries such as airlines and hotel rentals will remain strong for both domestic and foreign markets.

Distributors have tremendous power particularly in independent film. They have the ability to influence script changes, casting decisions, final edits, and marketing strategies. They are also often involved in the financing of the film, and act as gatekeepers of the film industry. All of this power is by way of the distribution agreement (Levison 2007, 118-119). The negotiation of the distribution deal is can include some significant factors for the producer including fee rates or marketing strategies to promote the status of a film. Armed with the rights (ownership of copyright by license) the distributor relicenses the property to various media and other distributors throughout various territories in the global market. This may include theatrical, cable,

DVD, pay-per-view, commercial television, and non-theatrical (army bases, airplanes, navy at sea, etc.), satellite, tablets or cell phones, and foreign markets. While distributors will have their own ideas of what will sell in various markets, distributors in Canada have 112 their own niche and will acquire films that they have a feeling for, and a sense that the film will appeal to a particular market.

Approaching a distributor with a finished film makes it easy for the distributor.

They know how it looks and will have a definite sense of the market potential. Getting acceptance of a film into festivals is another means of attracting distribution. While there are Canadian film distributors who are very supportive of films made in Canada, the major studio distribution controls the largest portion of theatrical exhibition and Canadian distributors with strong relations with the majors get the larger share of films that will attract the biggest audiences. On average English Canadian feature film have 1% to 3% of the theatre screen time across Canada.

In the process of development and creating the Business Plan, the producer will benefit from careful research and analysis of the current distribution, exhibition and marketing success of films similar to the proposed project. The difference in distributors is characterized by taste, audience focus, and economies of scale. Producers must look ahead with a sense of ownership about the marketing of a property. Some distributors may offer an amount of money as advance, but it may be much more worthwhile, for a low budget film project to get a minimum guarantee, a possible commitment to prints and advertising costs (P & A), or payment of performer royalties.

Low budget films do provide the opportunity for return on investment. However, movie attendance is very difficult to forecast and a high degree of risk can translate into a high rate of failure (Hoskins, McFadyen, and Finn 1997, 51).

113 International Co-production Treaties

Opportunities for Canadian producers continue to develop under international coproduction treaties for film and television productions. Canadian feature films cannot be made without co-production funding. Significantly, television is very closely tied to feature film production in Canada. For instance, government-funding agencies such as

Telefilm Canada require that a producer have a broadcast license as part of the cost recoupment strategy before committing public funds to a project. For domestic production this translates into some additional constraints in terms of meeting Canadian content rules, but larger feature film budgets require even more resources. Typically this necessitates partnering with foreign producers to assemble the funding necessary for multi-million dollar productions via coproduction treaties. Canada is a partner in film and/or television coproduction treaties with 55 countries worldwide. (See Appendix C for list of countries.)

What may surprise some is the fact that there is no co-production treaty between

Canada and the United States and none is anticipated in the foreseeable future. There is no Telefilm equivalent in the United States; in other words there is no national public funding structure. The film industry is viewed in the U.S. as being entirely dependent upon a free-market economy. However, there has been and continues to be a good deal of co-production treaty activity between Canada, the United Kingdom and France. Each of these countries represent one third of the total number of international coproductions

Canada has with foreign countries. The remaining third is divided between various countries in the world. These treaties are administered on behalf of the Canadian 114 government by Telefilm Canada through its International Treaty Coproductions

Department.

Official treaty coproductions are under the auspices of a bilateral treaty and enjoy national status in the partner countries. This means they qualify as Canadian content for broadcast purposes and are eligible for financing programs available to Canadian film and television productions. In partner countries, the productions qualify for domestic broadcast quota purposes and also enjoy access to all funding available to domestic productions (Cultural Affairs, Heritage Canada). The evaluation process for certification as a treaty project respects the basic principle governed by a bilateral treaty: the notion of proportionality. This implies that the respective creative contributions of each party, the expenditure in each country, the copyright ownership, and the sharing of distribution territories should all be proportionate to the financial contribution of each country.

Qualifying coproductions are also eligible to access funding in the partner countries in addition to domestic funding benefits.

The overall volume of English-language coproduction projects was down in 2010 to 49 from a high in 2008 of 66 with a volume of close to $400 million (CMPA 2011).

Between 2001 and 2010, France was Canada's leading bipartite treaty coproduction partner followed by the United Kingdom. Other bipartite treaty coproduction partner countries include Australia, Germany, Ireland, China and the Philippines (CMPA 2011).

Media Convergence Alternatives

Getting an audience out to the cinema anywhere in the world is growing harder and harder, with the variety of television programming growing and the addition of new 115 media access to films, television series and other forms of entertainment. Some exhibition owners in Canada have reinvented their venues as sources of entertainment, turning them into everything from miniature amusement parks to exclusive alternative locations for live performances such as wrestling or boxing matches. Some exhibitors have experimented more recently with other uses that include showing live opera from

New York City via satellite delivery with state-of-the-art sound systems. Another plan from an exhibition chain would offer live plays from New York's Broadway shown in its theatres. For audiences, this is a very appealing alternative to seeing the live shows, with their high ticket costs and the cost of airfare, food and accommodation. These

"theatercasts" are possible as a result of new technology using digital projectors and satellite feeds that are not unlike those used for home reception. While teens and young adults have continued to turn out for blockbusters, increasingly empty cinemas provide unique cultural opportunities to cultivate audiences in Canada and elsewhere.

Reinventing cinemas could mean cultural benefits and possibilities for cities with divergent populations like Toronto. International cultural events could be scheduled and, just as occurs already in television, provide access for niche markets that will pay a premium for access to cultural products from other countries, in other languages; these would be events that they cannot attend but may experience live in the cinema and they will allow them to stay connected to their original culture.

Cinemas have attempted various reinventions of themselves to attract audiences, creating an ambiance related to the spectacle of classic cinema, with decor that includes models of popular characters, and other memorabilia from blockbusters (Acland 2003, 113). However, with diminishing consumption of television, advertisers are turning to alternative media to lure audiences to purchase their products and are increasingly using cinema to pitch to captive audiences. While the placing of advertising ahead of films has been around for a number of years, it risks alienating audiences to an even greater extent by subjecting them to more and more advertising before the feature presentation begins.

Another constraint to alternative cultural uses of cinemas is the fact that aside from the Canadian owned Cineplex Galaxy, Canada is dominated by foreign ownership of the cinemas. In 1986 there was a return to the pre-television growth and prosperity in the motion picture business and at the same time exhibition and distribution in Canada saw a revolutionary realignment with over 4,377 screens being bought and sold for a total of $1.6 billion. In the U.S. a return to vertical integration of production, distribution and exhibition was justified on the basis that exhibitors were not handling the property of the studios as they should, resulting in damaged prints. Of course this gave the studios control over booking and scheduling, box office pricing in addition to a bigger share of the receipts. Twelve distributors control 96 per cent of the global activity today. In addition, Hollywood majors represent 99 percent of the domestic box office and 87.5 percent of international offerings. Since control of many of the screens across the country, and the world, are controlled by a small number of corporate interests, cultural products have become another target for media conglomerate control and profit taking through the purchasing of copyright ownership. The Hollywood majors may be buying up Broadway, the Metropolitan Opera Company or the National Ballet to turn it into another property for exploitation on the global market. 117 There are a very large number of film festivals in varying cities and towns right around the world. There are several that are focused on a particular niche of filmmaking genre, and there are several that are considered to be markets for buyers and sellers of films and television productions. This is somewhat of a niche market as opposed to the general cinema fare from major studios, but the festivals occur through the seasons in various parts of the world and they do have a considerable audience following.

118 Conclusion

The legacy of producing Canadian feature films in Ontario is rich with unique and accomplished films. Aside from a worldwide reputation for documentary filmmaking,

Canadian filmmakers have a deserved notoriety for a variety of fiction feature films.

Despite the fact that many box office successes were shot in Canada few moviegoers know that films like Chicago and several other commercially successful movies were not filmed in "Hollywood" but in Toronto.

We have established the historical events resulting in the constraints of being a neighbour to the biggest and richest feature film producing nation in the world, however the challenges have not only come from outside our country. In fact, the very audience that producers hope to attract to the cinema has often avoided "Canadian" features. The comparison of Canadian films to major studio movies is inescapable, but the independent films of the US demonstrates the potential for producers determined to make films that are creative yet economically feasible. The track record shows that distributors will take some risk with films that are relatively low budget but have some audience appeal. Even films that are considered "no budget" films (i.e., under $100,000.00) or may be controversial in nature have made it to film festivals and secured distribution deals. The successful "break out" films that get noticed and do well at the box office are few and far between, and the chances of it occurring through the established channels are diminishing. However, there is an appetite for low budget film, and they may come from almost anywhere in the world.

119 One of the popular venues for cinema audiences is the film festival. Film festivals have been a great source of publicity, potential sales, and audience recognition for filmmakers. It must be noted that the Toronto International Film Festival (TEFF) has been a source of cultural stimulus for audiences, but more importantly it is an opportunity for new and experienced Canadian filmmakers to showcase their work. TIFF attention provides the opportunity to further network production partners, connect with distributors and gain credibility for support from government funding agencies and other investors.

There are innovative cultural institutions that have recently occupied the physical and mental space of the film going public. For instance, there is TIFF Bell Lightbox in downtown Toronto. It is not only a venue for art films, films otherwise only seen at festivals, but also a venue for classic cinema, providing special reviews of celebrated directors, producers, and specialists of technical and creative aspects of the art. TIFF is a significant contributor to Toronto as the centre of film in Canada. TIFF's Bell Lightbox provides a tremendous benefit for Toronto based film professionals, film students and aspiring amateur filmmakers to see celebrated works, attend guest lecture series, and visit film related exhibitions.

Provincial film policy in Ontario particularly the Ontario Media Development

Corporation (OMDC) is another significant contributor to the support of existing filmmakers and fosters the growth of new talent. The OMDC contributes to the creative independent producers' opportunities in both television and theatrical film production, as well as other cultural products such a new digital based projects.

The Ontario government not only supports the independent production property 120 owners with equity financing and tax credits, but it also provides the foreign location and service production sector of the industry with tax credits.

The English-language production centre of the CBC in Toronto provides another source of development for the domestic film and television industry with internships and other opportunities. The NFB English-language production is centred in Toronto as well, and adds to the development of film production with support programs, free screenings, and other public access programs. Toronto is the centre for top rated post-secondary film schools. The major unions (e.g., IATSE and ACTRA) and guilds (e.g., DGC, WGC) are also centred in Toronto providing training and support programs for the artists and technicians of the industry as well.

Another contributor to both the foreign and domestic business models of the film industry in Canada, and a contributor to Ontario's economy is the existence of a very significant creative industries cluster or creative agglomeration in Toronto (Scott and

Pope 2007). The creative runaway component of outsourcing has also provided domestic independent producers with new digital technologies associated with computer based graphic imagery, animation and special effects (Ibid.). There is a high concentration of post-production facilities, sound stage complexes, specialized artists and artisan, specialized technicians, camera and lighting equipment rental specialists, actors, film and television related unions and guilds, and other support businesses such as accounting and legal council. The list continues with broadcast facilities, publicity and advertising specialists, and other related support. This large cluster of supporting businesses in the

Greater Toronto Area (GTA) is another significant contributor to the future potential of 121 the Ontario film and television industry. Toronto's film and television cluster ranks third in North America (Vang 2009). Several domestic independent production companies based in Toronto are thriving, for example Shaftsbury, Rhombus, Spy Films,

Breakthrough, Serendipity, Arc Productions, E-One Entertainment, Imax, to name a few.

Despite the support for the independent domestic production, many aspects of the conventional media have already begun to change? The audience of today is adapting, but the audience of tomorrow may have very different expectations. Where does the younger audience get their information, and where are they going for entertainment?

Where should filmmakers be looking for support and an audience to sustain their art and craft? Current innovations in technology may also be opportunities for producers. How might producers capture the value of their productions in a rapidly changing cultural product delivery environment? The Internet has dramatically shifted the reality of supply and demand. There are no longer the same limitations of the physical world, especially when it comes to distribution. The concept of renting out a theatre, a physical space, is optional but not necessary to get an audience and more importantly a revenue stream.

Internet distribution means that geographic constraints are gone. Web distribution has increased choice and replaced the scarcity of old. Out-of-print books and hard to find films can be sold by sellers and consumed by ready customers. Access on the Internet with such providers as Amazon has created an entirely new means of access for both the cultural product consumer and the creators (Anderson 2006, 17).

In addition to the changes in the distribution of cultural goods, the social networking potential has blooming at an incredible rate. Blogs, customer reviews, online social (e.g., Facebook and Twitter) networks, and business networking providers (e.g.,

Linkedin or Flickster) have empowered consumers to share opinions, spread the word or send a link. Other collectives like YouTube have created phenomena like the "viral" music video and given exposure to filmmakers and series creators who have leveraged the exposure to secure broadcast licensing deals. The power is shifting to some extent from the conventional distributors, advertisers and agents to customers, enthusiastic fans and creators. Aside from the main stream Hollywood, cinema audiences have access to

Internet portal giants such as Netflix or iTunes, broadcaster video-on-demand (VOD) and controversial file-sharing sites (e.g., Torent) providing distribution.

Creative producers of film and television are scrambling to discover the key to exploiting the cultural product potential of the Internet. While TV has not been around that long compared to filmmaking, it is a conventional push medium that is in jeopardy of ultimate extinction because it is completely reliant on advertisers, and the advertisers are seeking to reach consumers who are not watching TV. If the largest sector of consumers is not watching television, what are they watching, or doing? They are on their computers, tablets or smart phones.

The push medium is characterized by the fact that it is coming at you when you turn on the television or a radio, i.e., there are a fixed number of alternatives and you simply make a choice from what is coming to you. The Internet as a pull medium requires you to seek out choices in an apparently infinite universe of cultural products, manufactured goods, information, opinions, etc. While some attempts have been made to control the Internet with push-like content, for the most part use of the Internet means that sites offering content must pull you to the site in some way. The major Web portals will

have their own programming in competition with conventional television broadcasters.

Amazon, YouTube and Netflix have initiated their own feature film development and will

soon be in the episodic broadcaster business.

Canada has been developing a reputation in the video game sector of entertainment just as it has in television programming. Canada has a large and growing

service industry creating and developing games for the world's largest and best-known

game companies from the UK and Japan. The Canadian federal funding agency, Telefilm

has recognized the potential and increased the support of this new media development

across the country. The economic reality of cultural products as a key income to the

province of Ontario is recognized with refunds on development expenses for films,

webisodes, computer games and other new media initiatives.

As a relatively new distribution channel, the Internet may provide the global

cultural commons with creative possibilities and opportunities as yet undiscovered. The

ability to alter characters and various aspects of a game may have also given young users

the appetite to become user/creators in a new interactive engagement with entertainment

media. One Ontario filmmaker ventured into new territory in 2007 inviting fans and

students to re-edit his feature film with the lure of winning editing software. The Toronto

based film director Bruce McDonald put The Tracy Fragments (2007) up on a web site in

small portions that could be easily downloaded by most Internet connections. While this

may be viewed as clever marketing, it may also just be another instance of

acknowledging the user/creator nature of the digital age. 124 Distributors still like to see a theatrical run for a theatrically oriented feature film to create awareness and credibility in the ancillary markets. Cinema theatres are still very active but they have also reinvented themselves as the place to watch the Opera from the

Met, take in a Broadway musical or watch an Imax 3D movie.

The completion of the Internet is ubiquitous in the new age of distribution but it also means more control of content for the individual filmmaker. In his article on the new world of distribution, Peter Broderick points to a new economics that has and will continue to provide new opportunities. New revenue streams include direct sales to consumers through a web site. Broderick claims that several filmmakers have each made more than a million dollars selling their films directly from their web sites. He also sites others as having raised capital online with Internet fundraising. Others are using a series of video podcasts to build awareness of their films, and some have used YouTube,

Facebook and MySpace as venues to launch broadcast and home video distribution deals

(Broderick 2008). As an expert in this arena Broderick recommends hybrid distribution, licensing a property to a mix of conventional distribution channels in addition to splitting up the digital rights. Limiting rights to distribution partners also means avoiding conflicts where territory or time period commitments may overlap such as theatrical and television distribution conflicts.

You can take the newspaper, books, television series and TV news, movies, music just about any cultural product with you wherever you go, in a digital form that is. There are text readers, shared file sites, television program time shifting and streaming on-

125 demand. Television manufactures are now selling Internet-connected products to access the growing volume of Web based cultural products.

The funding agencies such as Telefilm and the OMDC have realize the need for a broadcast license as a prerequisite for funding assistance is out of date. New low budget support schemes do not require distribution deals or broadcast licenses as a prerequisite.

Broadcasters and their financial partners the advertising industry are strategizing for a future with far less control of product delivery for an audience that has grown up independent of the structure of autocratic media. As demonstrated by history, there is money to be invested in feature films in Canada as long as that money is tied to the established entertainment companies. The trend for feature films as indicated by industry insiders is to lower budgets with lower risk.

What remains consistent in this maze of media and delivery modes is the need for some to tell stories. The media and the means of consumption of the cultural products will inevitably change, evolve and provide an experience that seems increasingly like our own sensory life.

126 Appendix A: Clearance Procedures

Typical release requirements for Errors and Omissions insurance:

No. Requirement Action or Clearance Procedure

1 Vetting of content The script must be read prior to Production to eliminate any material that may potentially be defamatory, invades privacy, or may otherwise initiate a claim. 2 Vetting of content The producer and their counsel should continually monitor the Production at all stages from development to picture lock, to eliminate any material that may give rise to a claim. 3 Research A Chain of Title search must be done unless a work is an unpublished original. This should include domestic and foreign copyrights, and renewal rights. 4 Research The origin of an unpublished original script should be researched for the basic idea, sequence of events, characters. 5 Research A Title Report must be obtained prior to a final title selection. 6 Release and Vetting Regardless of the Production being fiction or non-fiction it of content should be made certain that no names, faces or likenesses of any recognizable living persons are used unless written releases have been obtained. The term "living persons" includes thinly disguised versions of living persons or living persons who are readily identifiable because of identity of their character, or because of factual, historical or geographic setting. A release is not necessary if the person in question is not seen long enough, or in adequate detail to be recognized. 7 Copyright agreement All releases must give the Producer the right to edit, modify, add to and/or delete material, juxtapose any part of the film with any other film, change the sequence of events or of any questions posed and/or answers, fictionalize person or events including the release, and to make any other changes in the film that the Producer deems appropriate. 8 Copyright agreement The Producer must obtain all necessary synchronization and performance licenses for music from the composer or copyright holder. Licenses are required for prerecorded music as well. 9 Copyright agreement Written agreements must exist between the Producer and all creators, authors, writers, performers, and any other persons providing material or on-screen services.

127 10 Release contract Releases must be obtained for any distinctive buildings, businesses, or personal property or products that are filmed. This is not necessary if non-distinctive background use is made of property. 11 Research/Copyright If the Production involves actual events, it should be verified that the author's sources are independent and primary (contemporaneous newspaper reports, court transcripts, interviews with witnesses) and not secondary (from another author). 12 Copyright agreement The right to manufacture, distribute and release the Production must be obtained from all writers, directors, actors, musicians, composers, including holders of underlying copyrighted materials. 13 Copyright agreement If any film clips are used in the Production, licenses and authorizations must be obtained from the owner of the clip or party authorized to license the clip for second use. Release is required from any performer or copyright holder within the clips. 14 Research/Release Where the work is fictional in whole or in part, the names of all characters must be fictional. Clearances must be obtained if real names are used whether living or deceased. 15 Research Consideration should be given to the likelihood of a claim, if there is any person or property portrayed in the Production that has previously sued.

128 Appendix B: The Golden Age of Major Studios

In the golden age of American cinema the major studios controlled 95% of production and distribution. From the late 1920's to the 1960's the studios flourished. In the 1970's television was eroding their audience, and a few studios met with catastrophic financial failures. From the mid 1980's to 2005 large conglomerates have taken control of the major studio and other media.

The Original 5 Major Studios Columbia Pictures 20th Century-Fox Warner Bros. Paramount Pictures Universal Pictures

Additional Smaller Studios of the Golden Age Metro-Goldwyn-Mayer (merged into Sony/Columbia) United Artists (merged into MGM) RKO Radio Pictures (defunct 1960-80, dormant 1993-97) Disney Studios

Major Studios - Conglomerates of today The owners of the major studios are now backers and distributors, while production is mostly independent production companies. The focus of the majors is on development, financing, marketing and merchandizing.

The current six giant corporations controlling the entertainment industry:

Table 1 Conglomerate Parent Major Studio Other Art Genre/B movie U.S./Can. Division Subsidiary Mainstream house/Indie Subsidiaries Market Subsidiaries Subsidiaries Share (2006)1 Sony Sony Columbia MGM, UA Sony Pictures Screen Gems, 21.1%i Pictures Pictures Classics TriStar Pictures, Destination Films

129 News Fox 20th Century Fox Fox Faith, Fox 17.0 %2 Corporation Filmed Fox Searchlight Atomic Entertain ment Major Studios - Cong omerates of today, cont'd

Conglomerate Parent Major Studio Other Art Genre/B movie U.SJCan. Division Subsidiary Mainstream house/Indie Subsidiaries Market Subsidiaries Subsidiaries Share (2006)]

The Walt Walt Walt Disney ABC Miramax Hollywood 16.7%2 Disney Disney Pictures/Touchs Films Pictures Company Motion tone Pictures Pictures (unified Group business with separate brands) Time Warner Warner Warner Bros. New Line Warner 14.9%- Bros. Pictures Cinema, HBO Independent, Entertai Films, Picturehouse nment Castle Rock Group, Entertainment HBO Viacom Paramou Paramount DreamWorks Paramount 11.0%- nt Pictures SKG Classics/Para Motion mount Pictures Vantage, Go Group Fish Pictures (under DreamWorks) General NBC Universal Focus Rogue Pictures 10.9%- Electric / Universa Studios Features Vivendi 1 Source: http://www.worldlingo.com/ma/enwiki/en/Maior film studio#1990s.E2.80.93present

130 Appendix C: Coproduction Treaties

International Treaties

An international coproduction treaty is a written agreement between two or more countries that outlines obligations that must be fulfilled by each party with regard to the film or television production in question. Canada has entered into international coproduction treaties with 55 countries.

Table 2 Algeria Japan Argentina Latvia Australia Luxembourg Austria Macedonia Belgium Malta Bosnia-Herzegovina Mexico Brazil Morocco Bulgaria Netherlands Chile New Zealand China Norway Colombia Republic of the Philippines Croatia Poland Cuba Romania Czech Republic Russian Federation Denmark Senegal Estonia Singapore Finland Slovak Republic France (Cinema) Slovenia France (Television) South Africa France (Mini-treaties) South Korea Germany Spain Greece Sweden Hong Kong Switzerland Hungary United Kingdom Iceland Uruguay Ireland Venezuela Israel Yugoslavia (Serbia and Montenegro) Italy Source: Official Coproduction Guidelines, Telefilm Canada (www.telefilm.gc.ca') http://www.telefilm.gc.ca/04/41.asp

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136 Filmography

A Cool Sound from Hell, directed by Sidney Furie, 1959.

A Dangerous Age, directed by Sidney Furie, produced by Nat Taylor, 1958.

A Married Couple, directed by Allan King, Allan King Associates, 1969.

Armageddon, directed by Michael Bay. Touchstone Pictures. 1998.

Away From Her, directed by Sarah Polley, Lionsgate, 2006.

Cannonball, 39 episodes, Normandie Productions and ITC Entertainment co-production 1958

Chicago, directed by Rob Marshall. Miramax Films. 2002.

Crash, directed by David Cronenberg, Fine Line Features. 100 minutes, 1996.

Dead Ringer, directed by David Cronenberg, 20th Century Fox. 87 minutes, 1988.

Dead Zone, directed by David Cronenberg, Paramount Pictures, 87 minutes,1984.

Drylanders, directed by Don Haldane, NFB, 1963. eXistenZ, directed by David Cronenberg, Alliance Atlantis, 97 minutes, 1997. Goin' Down the Road (1970), directed by Don Shebib, produced by Don Shebib, NFB, 1970

Gothika, directed by Mathieu Kassovitz. Columbia Pictures. 2003.

Hawkeye and the Last of the Mohicans, directed by Sam Newfield, produced by Sigmund Neufeld, 39 episodes, television series, 1956 - 58.

History of Violence, directed by Davis Cronenberg, New Line Cinema, 2005.

In Praise of Older Women, directed by George Kaczender. 1978.

Johnny Mnemonic, directed by Robert Longo. TriStar Pictures.1995.

Les Plouffe, directed by Gilles Carle. 1981.

137 Les vie heureuse de Leopold Z, directed by Gille Carles, 1965.

Lies My Father Told Me, directed by Jan Kadar, 1975.

Lolita, directed by Stanley Kubrick, Metro Goldwyn Mayer, 1962.

M Butterfly, directed by David Cronenberg, 101 minutes, Warner Bros.,1993.

Meatballs, directed by Ivan Reitman. Paramount Pictures. 1979.

Naked Lunch, directed by David Cronenberg, 20th Century Fox, 1991.

Nobody Waved Goodbye, directed by Don Owen, produced by Roman Kroitor, NFB, 87 minutes - feature film, 1964.

Paperback Hero, directed by Peter Pearson. Agincourt International, 1973.

Partners, directed by Don Owen, NFB, 1976.

Porky's, directed by Bob Clark. Twentieth Century Fox, 1981.

Prom Night, directed by Paul Lynch, Avco Embassy Pictures, 1980.

Rabid, directed by David Cronenberg, New World Pictures, 1977.

Rip-Off, directed by Donald Shebib, 1971.

Rocky Horror Picture Show, directed by Jim Sharman, 20th Century Fox, 1975.

Scanners, directed by David Cronenberg, Embassy Pictures,1981.

Shivers, directed by David Cronenberg, produced by Ivan Reitman, Trans American Films,1975.

Sidekicks, directed by Aaron Norris. Triumph Films. 1992.

Slipstream, directed by David Acomba. 1973.

The Adventures of Tugboat Annie, directed by John Llewellyn Moxev. TV series, 1957.

The Apprenticeship of Duddy Kravitz, directed by Ted Kotcheff. Paramount Pictures 1974. Toronto Jazz, directed by Don Owen, 1974.

The Bloody Brood, directed by Julian Roffman, produced by Julian Roffman and Nat Taylor, DOP - Frank Follette, B & W - 80 minutes - feature film, 1959.

The Dirty Dozen, directed by Robert Aldrich. Metro-Goldwyn-Maver. 1967.

The Fly, directed by David Cronenberg, 20th Century Fox, 87 minutes, 1986.

The Grey Fox, directed by Philip Borsos, Zoetrope Studios, 92 minutes, 1983.

The Hustler, directed by Robert Rossen, 20th Century Fox, 1961.

The Kingdom of Heaven, directed by Ridley Scott (William Monahan, screenwriter) 144 minutes, 20th Century Fox, 2005.

The Mask, directed by Julian Roffman, produced by Nat Taylor, 1961.

The Sweet Hereafter, directed by Atom Egoyan, Fine Line Features, 1997.

Titanic, directed by James Cameron, 20th Century Fox. 1997

Tracy Fragments, directed by Bruce McDonald, THINKFilm. 2007.

Weekend At Bernie's, directed by Ted Kotcheff. 20th Century Fox, 1989.

Who Has Seen the Wind, directed by Allan King. 1977.

Videodrome, directed by David Cronenberg, Universal Studios, 87 minutes, 1983.

139