Canadian Heritage Committee on Feb. 23rd, 2015

[The Chair (Mr. Gordon Brown (Leeds—Grenville, CPC)), Conservative, Gord Brown]

Good afternoon, everyone.

I'm going to call to order meeting number 34 of the Standing Committee on Canadian Heritage. Today we are starting our feature film industry study, and that is pursuant to Standing Order 108(2).

With us today are three representatives from the Department of Canadian Heritage. We are going to hear first from Jean-François Bernier, who is the director general, cultural industries. Along with him today are Johanne Mennie, director of the Canadian Audio-Visual Certification Office, and Scott White, director of film and video policy and programs.

Mr. Bernier and I participated in the last study about 10 years ago, so there's a little bit of institutional memory around the table.

Mr. Bernier, you have the floor for 10 minutes.

[Jean-François Bernier, Director General, Cultural Industries, Department of Canadian Heritage]

Good afternoon, everyone.

The Department of Canadian Heritage appreciates your invitation to appear while the committee conducts its review of the Canadian feature film industry.

Our objective today is to present you with an overview of the feature film industry in Canada and the federal policy framework.

I would like to begin on page 3, which provides an overview of the ecosystem in which the main stakeholders you'll meet throughout your work operate.

From the time a feature film is created, many professionals and activities are needed to bring it to an audience. This process used to be fairly linear, but today's reality is different. Technologies are transforming the traditional relationships in the film business.

The Canadian audiovisual sector is big business, with $5.8 billion in film and television production in Canada in 2012-13 and more than 127,000 Canadians employed in the industry. Specifically, Canadian feature film production accounted for 6% of the overall activity. There are about 500 companies involved in film and television production in Canada and 30,000 Canadian creators earning a living in these sectors. Many entrepreneurs and creators are involved in both domains.

Worldwide, feature film is a high-risk and very expensive cultural business. Canada is no exception.

First, our market is small, and the production costs cannot be recovered domestically.

Second, Canada is split into two linguistic markets, each with distinct characteristics and challenges.

In the English language market in particular, Canadian producers compete face to face with the American studios for both talent and audiences. As in most countries, the Government of Canada supports its domestic sector. And as we can see from the chart on page 5, public support is a significant part of the financing of Canadian feature films.

Canadians are watching films in a variety of ways. Although online viewing is growing, traditional formats still dominate. Theatre attendance in Canada remains relatively steady, with total box office revenues of over $1 billion in each of the last five years. Television is where most Canadians watch feature films. In 2013 over 90% of the views of Canadian films were on TV. But the growth of online platforms for film, such as streaming services like Netflix, is rapid and significant.

The use of the power of social media in the film industry is booming. It is proving to be a key aspect in the interaction between the creators, the entrepreneurs and the audience.

The federal policy framework aspires to optimally integrate its legislative, financial and institutional tools to ensure that Canadian films are made and are accessible.

The Canadian content point system has been a pillar of our policy framework since the seventies. This 10-point system is based on the nationality of people holding key creative positions in audiovisual productions.

The points system is completely objective and does not focus on subjective factors, such as the subject of the film or where it takes place.

A treaty co-production is created by pooling the creative and financial resources of Canadian and foreign producers under the terms of an international treaty. Canada has been co-producing for 50 years and has treaties with 54 countries. Our main partners are France, the U.K., and Germany. The Canadian content point system does not apply to treaty co-productions, but they are granted national status in both countries. This makes the co-productions eligible for all public support programs. While co-production activity varies from year to year, 20 feature films were certified as treaty co-productions in 2013.

Created in 1995, the Canadian film or video production tax credit is the primary tax incentive for Canadian content film and television production. It is based on Canadian labour expenses. Productions must have a minimum six out of ten Canadian content points or be a treaty co-production. Some 93 feature films were certified as Canadian in 2012-13. Finance Canada projected the total value of this tax credit at $265 million in 2013. Feature films represented about 9% of that amount or about $23 million.

Since 1997 the film or video production services tax credit has encouraged the hiring of Canadians in productions shot in Canada. Canadian content is not a consideration for this credit, which is also based on labour expenditures in Canada. This program has helped to build a world-class production sector in Canada that attracts foreign producers. Finance Canada projected the total value of this tax credit at $110 million in 2013.

Established in 1967, Telefilm Canada is a crown corporation mandated to foster and promote the development of the audiovisual industry in Canada. Telefilm supports the development, production, distribution, and marketing of Canadian feature films. It also administers the audiovisual co-production treaties and the Canada Media Fund.

Telefilm Canada also supports Canadian film festivals and Canadian participation in foreign markets and film festivals.

In 2013-14, Telefilm Canada invested in 73 feature films, all scoring at least 8 out of 10 points for Canadian content or were produced in co-production.

CBC/Radio-Canada plays an important role for Canadian films. CBC is required, by condition of licence, to broadcast Canadian feature films.

CBC's involvement in Canadian films is strong, and has been for many years. This is important because, as I mentioned, Canadians watch Canadian films on television the most.

The National Film Board of Canada has been producing and distributing audiovisual content for over 75 years. The NFB has an impressive catalogue of over 13,000 titles, including a number of Canadian feature films.

Launched in 2000, From Script to Screen represented a major shift in the government's policy for feature films, from building an industry to building audiences. At the time, federal resources for feature films were doubled to $100 million and a target of 5% box office market share in Canada for Canadian films was set.

In the 1970s and 1980s, the Canadian film distribution sector was marginal. The market was dominated by the Hollywood majors that were not distributing Canadian films. In the late 1980s, three measures were put in place to create a domestic distribution sector that would get behind Canadian feature films: first, restrictions on foreign investments; second, requiring a Canadian distributor for a Canadian film to receive public funding or tax credits; and third, a funding program for Canadian distributors through Telefilm Canada.

In particular, the Broadcasting Act confers regulatory powers on the CRTC. There are three main regulatory measures relating to Canadian content: requirements for broadcasting Canadian content, spending requirements for Canadian content, and financial contributions for Canadian content by cable and satellite broadcast services.

Pages 18 and 19 present other tools relevant to the Government of Canada's policy framework for the film industry. These include the Investment Canada Act, the Copyright Act, the Canada Council for the Arts and Library and Archives Canada.

Page 20 shows that while some films have received critical acclaim and box office success, as a whole it is still challenging for Canadian films to find audiences, particularly in the Canadian English-language market.

Results for multi-platforms, including television, give a fuller picture, and total market share is general higher.

Generally speaking, in the domestic market, Canadian productions in French perform better, whether in theatres or on other platforms. Canadian films in English, co-productions in particular, perform better internationally.

On page 21, we've put some recent examples of Canadian films that have achieved particular commercial or critical acclaim. Just last weekend, Mommy received the best award for foreign film in the César, which is the French equivalent of the Oscars.

The government's continued support toward the creation of and access to Canadian feature films has remained the key objective of successive governments. The challenge for policy-makers is to remain responsive to rapidly changing market conditions. Our ability to adapt will ensure that Canadian films continue to be an important economic driver in Canada and an ambassador of Canadian culture at home and abroad.

My colleagues and I look forward to the committee's report and are available to answer any questions you may have.

[The Chair, Conservative, Gord Brown]

Thank you very much, Mr. Bernier.

We're now going to move to the questions, and we're going to start with a seven-minute round.

We're going to go to Mr. Young.

[Terence Young, Conservative, Oakville, ON]

Thank you, Mr. Chair.

Thank you for coming here today. It was a very interesting presentation.

This is a big question, but I don't expect a very detailed answer. Could you sum up briefly the key changes that have happened in the last 10 years in the industry in Canada? We did a study 10 years ago, and I wasn't here at the time, but we have that as a resource and I think it's a useful resource as far as it goes.

What are the key changes that have happened dynamically in the industry in the world market for film, and how have we responded to that?

[Jean-François Bernier]

You're right. This could be a fairly standard answer—

[Terence Young, Conservative, Oakville, ON]

Take as much time as you want.

[Jean-François Bernier]

—but I'll give it a kick, and I'll maybe ask Scott to jump in.

If I could summarize the last 10 years, it's the development of digital technology. Netflix did not exist 10 years ago. Today, 30% of Canadians subscribe to Netflix.

The possibilities of technology—and I mentioned social networks—are unbelievable in the potential that this gives, not only to Canadian films in Canada, but to Canadian films abroad.

Just before Christmas, a Canadian film was released, and the name is Corner Gas. They used very active social networks to promote the film. It was in theatres for four or five days; it was not there for four or five months, as it used to be 10 years ago. Maybe I'm exaggerating, but the window of release in theatres was very short. At the same time, they released it on video on demand and various services that were nascent 10 years ago.

Ten years is like the life of a dog. You have a dog that is 10 years old; it's like he feels 100 years old. Ten years was a warp time, not only in film, but in music and in all cultural industries.

Scott, do you want to add a few things?

[Scott White, Director, Film and Video Policy and Programs, Department of Canadian Heritage]

I think one of the key factors is the technology change. We've seen lowering costs both in production and distribution.

People are looking for content on mobile platforms and on their terms, so there has been a shift in terms of the dynamic between what you could call the gatekeepers—producers and distributors—and consumers. Consumers are becoming much more in control of what they watch and when they watch it.

If we look around the world, we also see growth in other markets. This is also something that's changed since about 10 years ago. The United States is still the dominant audiovisual market in the world, but that won't last for long. China is coming on very strong. India has always been very large. The Chinese market is where the action is right now for American producers wanting to get in there. That's been another big change.

Jean-François also alluded to the shortening of windows. This is kind of inside baseball terminology, but what we're talking about here is the time that is allowed for a film to be distributed on different platforms. It used to be very sequential and very orderly. The movie theatres would be first and it could be that a film would only be available in a movie theatre up to several months. If you wanted to see it later on your television, you would have to wait several months or maybe even several years. There was this orderly progression through the various windows.

That's been under a lot of pressure, especially in the last couple of years, more so maybe in the United States but I think it's coming here too. We have films now that are going straight to digital platforms and bypassing movie theatres. This offers challenges. It depends where you stand. Movie theatres are perhaps anxious about this, but it offers many more possibilities for producers for getting their products out there on different platforms, because not every movie is suitable for theatrical presentation. Now we have the opportunity for different types of films to reach their audiences.

[Terence Young, Conservative, Oakville, ON]

Have the technological changes helped Canadian filmmakers get their stories, their films, into more audiences? I see that the average investment in a Canadian film is $4 million versus the U.S., which is $70 million.

[Jean-François Bernier]

It's $100 million.

[Terence Young, Conservative, Oakville, ON]

It's $100 million.

We're at a disadvantage because our country is one-tenth the size and our economy is one-tenth the size, etc. Do these new platforms give us advantages in any way, and if so, is that as independents or does it have to be with co-productions? How important are co-productions?

[Jean-François Bernier]

The technology has certainly given opportunities to every filmmaker on the planet. The market is not Canada. The market is the planet. When you put something on YouTube, whether you're in South Korea, Japan, or the Gaspé, it is there. The difficulty for the public policy development is that it is very difficult to measure how much money a film is making on these new platforms. Data is difficult to get.

But the theoretical concept is that, yes, new technologies open up the planet to Canadian creators and Canadian products. Equally, it opens our market to other creators and products. So the challenge remains, as in music, books, and other sectors, to stand out from the crowd.

Successes in the last few years.... Ten years ago we had success, but over the last 10 years, every year there is something about Canadian films. There is a buzz about Canadian films: Monsieur Lazhar, Incendies, Mommy, Resident Evil.

Canadians are very well-perceived and seen. Canadian directors are receiving phone calls or emails from around the planet to work abroad. Look at Mr. Vallée, the director of Wild. This film was produced by an American company, but it's still a Canadian talent out there.

You asked if co-production could help the Canadian feature film industry. It can help, for sure. If there is something that has not changed over the last 10 years, it is the difficulty of raising financing for films. Money is not growing on trees. Every government is trying to balance budgets, not only at the federal level, but in other countries, and at the provincial level. It is tough to raise money for films.

[The Chair, Conservative, Gord Brown]

Thank you. We're going to have to move on.

Mr. Nantel, you have seven minutes.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

Thank you, Mr. Chair.

I would like to thank our three witnesses for being here.

You might think I'm just saying this to be polite or out of habit, but it's very important that we conduct this major review. We have agreed to hear from individuals who have a good overview of the matter and to have the right witnesses appear. We want to try to fully understand the situation by focusing on the priority issues. As Mr. Brown said, a very comprehensive study was done 10 years ago. As Mr. Young said, we need to bring our attention to what has changed. So thank you for being here.

Let's talk about what has changed. I went through your document, and I think that it will help us organize our witnesses. I can't help but notice that you said earlier that technology was a big change. We feel the same way. I like pointing out that, when we all arrived here in 2011, hardly anyone had an iPad, whereas everyone does now. This has clearly changed.

You said that the issue was having audience statistics for companies like Netflix that are completely changing the game. I read an article this morning in La Presse that said that Netflix is having the same effect on the movies that Uber is having on taxis. We can't be against technology, but we need to consider its impact.

When I heard you say that having statistics is what will help us adjust to all this, I wanted to ask you how you intend to make up for the mistake the Minister of Canadian Heritage and Official Languages made. On the second day of the CRTC hearings, she said that she would not touch the Internet, when obviously that's what is shaking up the whole ecosystem.

[Jean-François Bernier]

Your question contains a trap, and I will try to avoid it.

There are three challenges when it comes to statistics: having available, reliable and reasonable statistics. You can send a questionnaire to everyone on the planet to find out if they saw a Canadian film last week, but I'm not sure that would be very effective.

The challenge in developing public policies is to properly assess the traffic. We know, for example, that Canadian films are available on Netflix. They will print some pages, and so on. You can watch Canadian films, but who is the audience for these films? You still can't get statistics on that.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

I understand, but it's a question I had to ask. It's on everyone's mind, even those who don't want us to talk about it. They all know that this has been said. I won't ask you to comment any further.

However, I will say this. I went to the Netflix site earlier. Using an iPhone app—which I'm sure is similar on an iPad—I calculated that there were 13 rows. The first row contained 77 choices, which ends up being about 1,000 titles. You can imagine that it's voluntary. I didn't do all this while you were talking because I was listening to you. In the 77 choices in the first row, I didn't see any Canadian content.

So that's what we're facing today, and it's the most important issue. We will have to find a way without it becoming politically unbearable for some of us. We will have to look into this issue.

I'm 51. Canadian content in the various media has made all the difference and exposed me to other things. I remember the first Canadian series I watched. It was The Friendly Giant. A few years later, it was The Beachcombers. These days, there are shows like Little Mosque on the Prairie and Corner Gas.

As you said, it's easier in Quebec because of the larger audience, the language barrier, our abundant productivity and our knack for storytelling. However, a local content quota was imposed on broadcasters who wanted to obtain the right to use the airwaves in their area. The big question for film production in Canada is this: what are we going to do? The answer is far from simple.

I invite all committee members to take a look at the book called The Birth of Korean Cool. I got interested in this by flipping through L'actualité and because one of my neighbours in Longueuil—let's call her Geneviève Duquette—told me that she loves Korean television, which surprised me. The site she told me about was dramafever.org. I'm only talking about the focus, but there is an entire cultural policy around this.

Excuse me for my very long preamble.

How do you think we can focus our study on tangible solutions related to multiplatforms? Ultimately, how can we avoid having the CRTC ultimately say that it is not mandated to study this?

[Jean-François Bernier]

If I had an answer to that question, I would have spoken about it in my presentation.

Mr. Chair, in my response, I would prefer to limit myself to the means.

The regulations in place since the 1970s have created the country's culture building. Times have changed. The regulations are harder to enforce. Let's say that they are under more pressure than ever before. Canada isn't the only one experiencing this. It's also the case in China, Russia and other countries.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

I understand.

I still have a few questions. Do I have any time left, Mr. Chair?

I only have 10 seconds left. I think I'll give you a break, Mr. Bernier.

[The Chair, Conservative, Gord Brown]

Mr. Dion, you have the floor for seven minutes.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Thank you very much, Mr. Chair.

I would like to thank our witnesses, as well.

I would like to jump directly to page 20. The 2014 graph shows a figure of 10%. If I understand correctly, that means that, of the box office revenues in Quebec, in French or in English, francophone Quebec films represented 10% of the Quebec market.

Is that right?

[Scott White]

They are French-language films shown anywhere in the country, but mainly in Quebec.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Ten percent of what?

[Scott White]

Ten percent of the box office revenues. That means that Canadian films in French—

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

You're saying that they make up 10% of the box office revenues?

[Scott White]

Yes, that's right.