Canadian Heritage Committee on March 9th, 2015

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

I have just seven minutes and there are so many things to discuss.

Thank you, Mr. Chair.

Thank you for being here, gentlemen.

Mr. Rapkowski, you use very strong words, giving rather a wake-up call. You speak about erosion of the 1998 policy, which will be dismantled, if we let the status quo continue unchecked.

I don't want you to repeat your presentation, which was a bit long for the taste of our chair, which I understand. However, can you in a nutshell tell us the main reasons for this erosion, since when we have been experiencing it, and what you would dream of seeing in our report to address this situation?

[Richard Rapkowski]

It does seem to be happening in the more recent past, I would say the last five years, where we've been seeing the major U.S. studios using this position they have as grandfathered to take advantage of these smaller independent films, and to take these films that would otherwise be distributed by Canadian distributors and use their system to distribute them. It seems to be a relatively new phenomenon. I think some distributors in the U.S. or owners of U.S. rights are starting to become wise to this idea that they don't have to go through Canadian companies, that they'll just go through their Hollywood brothers, who will distribute it for them in Canada because they're not subject to the policy.

So it seems to be increasing: we see it happen once and then it gets worse, and then it gets worse. That is why I am trumpeting a very loud horn about the distribution policy. I admit I am using strong language for it because we have tried to address it before with government and it seems to be falling on deaf ears. What people need to understand is the important role that distribution plays in the ecosystem. Without distribution, Canadian films won't get produced because the production community can't produce them without help from private funds from distributors, and it's the private funds from us that signal to Telefilm to invest in them as well.

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

When the U.S. started to do that, was it because we changed our policy or did they discover a loophole they hadn't discovered before?

[Richard Rapkowski]

I think they did discover a loophole and I think the studios have changed their model. They used to produce a lot more films and they had enough in their pipeline to satisfy themselves. Now, as you know, there are just fewer films, lots of these huge tent-pole films, and so they have extra capacity to fill their pipeline with these smaller films, and independent films have started to become a lot more popular. If you look at what was nominated for Academy Awards this year, these are the types of films that we have traditionally distributed as Canadian distributors, and it's a good business model for them.

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

Now, what would be the main solutions you would like us to write in our report?

[Richard Rapkowski]

It would be to recognize the intent of the policy and to come out with either policy directives—again, new legislation would be great—or, at the very least, a directive that this policy will be enforced according to its intent and the spirit of why it was brought in, not the letter of this grandfathered exception allowing people to circumvent it. I'm a lawyer by trade, and a film lawyer, so I don't have that much expertise in how these things could be accomplished by government. We would rely on the experts to figure out how these policies can be enforced, but again, it was working up until now and everyone understood how it worked. I think if there were an announcement from the government that this is the way the policy will be interpreted going forward.... Again, enforcement is difficult without legislation.

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

But you addressed that with the government. You had discussions with the minister about that.

[Richard Rapkowski]

We sent letters to Canadian Heritage to try to at least bring these, what we consider, violations of the policy to the attention of the ministry, and the response we got back was that it doesn't apply to the studios. We think that was the wrong interpretation of the policy because it's looking at a literal interpretation as opposed to focusing on what is most important, which is the intent of the policy and what it is meant to accomplish.

Looking at a literal interpretation just cuts the legs out, and we're left in a very difficult position, and it's going to affect not just distribution. We're not just trying to protect our own businesses as distributors, although that is important to us. It is part of the fabric. As Naveen said, it's a three-legged stool and without distribution—

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

In the coming days or next week, if you would send us more specific solutions about that, we would be very willing as a committee to look at them.

[Richard Rapkowski]

I gladly will.

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

Mr. Roy, you mentioned the role of the Canadian Broadcasting Corporation several times.

Is the corporation still able to support you?

[Patrick Roy]

Yes, it continues to support us. Of course, since it has less and less money, its funding for films has decreased over the years, but it is still a key partner and continues to play its role exceptionally well in Quebec.

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

Okay, but you do feel that it's running out of steam.

[Patrick Roy]

Yes, the funding has been decreasing for a number of years, and that automatically has an impact on us, the distributors, since we sell those films. When broadcasters pay less, we do the same when we buy films, and that has an impact on productions. So it ends up affecting the entire chain.

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

So you feel that the corporation is a vital tool?

[Patrick Roy]

It's a vital tool when it comes to financial matters, but as I said earlier, that also includes promotion. When people watch movies they like, they want to see more of the same. So the corporation is also a driving force in promotion, which is an important aspect.

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

What do you think about CBC's plans for the future? Do you think the corporation is headed in the right direction?

[Patrick Roy]

I have not read any specific information on CBC's plans. I know that the corporation has suffered significant cuts. As a distributor and a Canadian taxpayer, I will always support the CBC. I consider the corporation to be a key player in the industry.

[The Chair, Conservative, Gord Brown]

Thank you, Mr. Dion.

We have just a minute or so left.

Mr. Dykstra, if you want to squeeze in a question, we have time.

[Rick Dykstra, Conservative, St. Catharines, ON]

I do. It's for all three. I really would like to get into the production issue that Richard and both Naveen and Patrick have commented on, which you describe so well, but obviously we're a little stuck for time, so one of the issues here that I had was how streaming technologies like Netflix and Shomi have impacted the Canadian market.

Mr. Prasad actually commented specifically on a deal Elevation Pictures just made regarding a television show called Between.

[Naveen Prasad]

Yes, we're very proud of this. It's the first Canadian content Netflix original. Today it was announced that it's premiering on May 21 on Netflix around the world, excluding Canada, where Citytv, a Rogers media company, holds the exclusive Canadian distribution rights. It was a partnership between Rogers and Netflix, with a full Canadian crew: Michael McGowan, the show's creator; Don Carmody, a producer; and I'm serving as an executive producer as well. We're very proud that it's based on the system that has been developed over the years. Although this is a television project, it's a feature filmmaker, Mike McGowan, who had many films that Telefilm supported.... We see that there are these opportunities where Canadian content can make it to the big leagues, if you will.

The other side of that is whether Netflix is supporting Canadian content. I would say in some regards they are, but not to the degree that broadcasters have been, considering the program expenditure requirements on overall Canadian content. However, I would point out that there's nothing that clarifies how much of that has to be for Canadian feature films, which, I think, is an important point to mark.

[The Chair, Conservative, Gord Brown]

You have about 20 seconds.

[Richard Rapkowski]

If I could add, one of the most difficult challenges that we're faced with is the fact that these OTT services are not subject to regulation in Canada, and the Canadian broadcasters, who are their competition, are subject to regulation. That creates a very unlevel playing field, and it's very difficult because your only option is either to require less Canadian content for the Canadian broadcasters or regulate the OTT services, or leave an unlevel playing field. None of those options is great.

It's a very complex issue and I don't have a solution for it, but it is something that we need to look at because it does have the potential to erode the fabric of what we've established. Further study is needed on that topic because the broadcasters are obviously pressuring to reduce their commitments in the face of that, which I don't think is going to help the Canadian film industry.

[Naveen Prasad]

If I could add, all three of us, speaking on behalf of all the CAFDE members, would like to be involved in that process.

[The Chair, Conservative, Gord Brown]

Right, on that note, thank you very much. Thank you for your contributions. If you have any more that you'd like to contribute, please send it in.

The meeting is adjourned.