Canadian Heritage Committee on March 23rd, 2015

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

Good afternoon, everyone. Welcome to meeting number 37 of the Standing Committee on Canadian Heritage.

We are currently conducting a review of the Canadian feature film industry.

For the first hour today we have with us from the Canadian Media Production Association, Michael Hennessy, who is the president and chief executive officer, as well as Marc Séguin, who is the senior vice-president, policy. From New Real Films we have Jennifer Jonas, producer and co-chair of the feature film committee of the Canadian Media Production Association. As well, from Pope Productions, we have Paul Pope, producer, and co-chair of the feature film committee of the Canadian Media Production Association.

We'll be hearing from Mr. Hennessy for 15 minutes, and then we will move to our questioning.

Mr. Hennessy, you have the floor.

[Michael Hennessy, President and Chief Executive Officer, Canadian Media Production Association]

Thank you, Mr. Chair and committee members.

I am going to speak for a while and then the rest of the gang will also speak within the context just so I don't sound like I'm droning on by minute 12.

My name is Michael Hennessy, and, Chair, you have introduced us for the record, so that is fine.

Before I delve into specifics, just allow me to share some preliminary thoughts. First, it is well known that we have a world renowned and respected film industry because of the support and collaboration of government, so let me begin by thanking you for that support. In particular, we'd like to thank the Honourable Shelly Glover, Minister of Canadian Heritage and Official Languages for her unwavering commitment to our sector.

We know that the government fully appreciates the vital importance of film in helping to define Canada as a nation and to reflect the stories of different communities both geographic, and increasingly, virtual communities.

Film and audiovisual content in general can also make a contribution to our overall economy directly in terms of the creation of high-skilled jobs, inward investment, and exports; and indirectly in terms of raising our country’s brand internationally.

The government’s film policy of 2000 clearly states that film matters. This sentiment was echoed by this committee in 2005, which was the last time the committee examined the feature film industry. That said, we understand and deeply appreciate that the committee is not seeking to question the importance or relevance of the feature film industry to Canadians, to the economy, or to our national identity. The end game is not in question, but rather we wish to explore the best means to achieve our objectives going forward.

Mark.

[Marc Séguin, Senior Vice-President, Policy, Canadian Media Production Association]

It's important to be clear up front what we mean when we refer to feature films. We mean films that are scripted, developed, produced, and marketed with the intention of being released first in cinemas, the big screen, recognizing nonetheless that movies are more often seen on a multitude of other viewing platforms and especially on television.

Feature films are a unique form of audiovisual content. They are conceived to be experienced in a linear uninterrupted fashion, thus inviting the audience to connect with the characters and be drawn into the story. Feature film is indeed a distinct form of storytelling.

There are other characteristics about feature film that are also important to highlight. First, they are expensive to make if one wants to do so and do so well, to compete with the best the world has to offer. Second, the level of competition especially in English Canada is extremely fierce. This and other factors translate to Canadian feature films being a very high-risk endeavour for everyone involved.

If not for the generous and ongoing support from all levels of government, we would have a mere shadow of a film industry compared to what we have collectively built in Canada over the last 50 years. I would offer that we have a lot to be proud of and a lot to celebrate from our recent successes in Cannes to the global importance of the Toronto International Film Festival, but I would also suggest that together we can and should do better.

We can and should grow our film industry and with that multiply the job opportunities for Canadians seeking to work in this important creative sector, and especially for young Canadians. We can and should enhance the contribution this sector makes to Canada's economy and prosperity. Quite frankly, we can and should ascend our rooftops and shout this out loud so that all of Canada and indeed the entire world knows about it.

The feature film industry in Canada is a significant one. It is comprised of two distinct sectors. On the one hand, we have the Canadian content sector. This relates to feature films that are certified as Canadian by either CAVCO or the CRTC. This sector also includes films that are produced pursuant to one of Canada's many international co-production treaties. On the other hand, we have the foreign production services sector. This involves film production being carried out by a producer in Canada, but on behalf of a foreign company that ultimately owns the copyright on that film. These foreign companies are very often, but not exclusively, the Hollywood-based studios.

Total production activity related to Canadian content films alone was $376 million in 2013-14. This volume sustained 8,100 full-time equivalent jobs. Foreign film production in the same year accounted for another $857 million and just over 18,000 full-time equivalent jobs. This data only tells a small part of the story. When the entire film and television value chain is taken into account, and admittedly that's going beyond the strict confines of feature film, the numbers are impressive. It makes a $20.4 billion contribution to Canada's GDP. It constitutes 262,000 full-time equivalent jobs. There is $12.8 billion of labour income for Canadians. There is $5.5 billion in tax revenue to various treasuries, and it accounts for $2.4 billion in exports.

Paul.

[Paul Pope, Producer, Pope Productions; Co-Chair of Feature Film Committee, Canadian Media Production Association]

Mr. Chair, when we think of film, we start by thinking of going to the movies at the theatre down the street. That is still where the full experience of film is at its best, but the reality is that the primary place Canadians watch films is in their homes, and technology has only improved that experience over time.

Broadcasting has long been the primary means for Canadian films to reach large audiences, but as you have heard from other witnesses, the shelf space for Canadian film in the broadcast window has shrunk over time as private broadcasters have embraced more serialized dramas and the CBC has stepped back from film for strategic reasons linked to funding cuts. Simply put, even with many of the efficiency adjustments we'll discuss later, the future of the film industry and the benefits it creates will be tenuous without a strong presence on our television broadcasting system, because it is through this system on the large flat screen at home that the large majority of consumers will continue to watch film.

Mr. Chair, since the beginning of cinema, we have seen the Canadian presence in the theatre down the street severely limited due to the dominance of exhibition space by foreign studios, particularly Hollywood. We now face a similar threat when it comes to film on our broadcasting system because, if there is no preference or priority for Canadian space on the home theatre, then Canadians will have access only to foreign films. We don't need to repeat that mistake, and we don't and should not ever block access to the best films from around the world. There is room for the best of both worlds.

There is a pressing need to find effective ways in our policy tool kit to encourage Canadian television broadcasters, both the private sector services and the CBC, to participate more fully in the financing of Canadian films, scheduling them when Canadians are most likely to watch, and actively promoting them.

Canadian television broadcasters are not financing Canadian feature films as they once did largely because of the financial risk involved. The CBC has a mandate to support identifiably Canadian content and stories, and film in Canada has been one of the primary vehicles for delivering our stories. The shelf space for Canadian films on CBC has been barren indeed. With the loss of Hockey Night in Canada on Saturday nights, we can't help but think this is the perfect opportunity for the CBC to showcase Canadian films. As such, we would fully support a recommendation from this committee that the CBC be given additional resources to carry out such an initiative to help develop, produce, and showcase Canadian films, especially English-language films.

With respect to private broadcasters, we agree with other witnesses who suggest that the CRTC needs a special category under what it calls PNI, programs of national interest, to ensure appropriate funding for and promotion of Canadian feature film. The time is ripe for action here as the CRTC decided on March 12 to review its policy, but we also believe that the carrot is a better way to start than only a stick.

The CMPA recently developed and submitted a proposal for a new three-year pilot incentive to be incorporated within the existing framework of the Canada Media Fund. This proposal was discussed first with key broadcasters, and there was a high degree of support for it. We hope the CMF will accept our proposal for implementation this year.

We believe this incentive would be an effective complement to the Canada feature film fund that would allow producers and broadcasters to collaborate each year on a select number of Canadian films. It is expected that while these films would be released in theatres as the first window, they would quickly become available for broadcast on television, where the overwhelming majority of Canadians typically view Canadian films.

A closer collaboration in this regard would also allow for the development of cross-market promotional strategies that would increase the efficiencies in reaching the greatest possible audience success in both the theatre and television markets.

Jennifer.

[Jennifer Jonas, Producer, New Real Films; Co-Chair of Feature Film Committee, Canadian Media Production Association]

There are effectively three main federal programs in support of the feature film industry. We have two tax credit programs, one for Canadian content and one for production services, and as already noted, the Canada feature film fund, which is administered by Telefilm Canada. On the whole, we believe these federal programs to be very successful. Of course, they are not perfect. There are things we can do to improve them and to enhance their efficiency and effectiveness.

First, the CMPA is pleased with the positive changes that Carolle Brabant and her team at Telefilm have introduced over the last few years to the Canada feature film fund. Faced with a reduction to its parliamentary appropriation three years ago, Telefilm has worked hard to increase efficiency in its programs and has made a number of changes to achieve that end.

Telefilm, we believe, is functioning well and is effective, but Telefilm can and should do more. It can stimulate more film production, and as a result, foster employment growth. It can also place more emphasis on marketing and promotion activities, but with its current level of resources it can only do so much. Therefore, though we are wrestling with the federal deficit, we would still ask the committee to consider recommending that Telefilm’s appropriation be increased, and at the very least, to where it was before the reduction. With more resources, Telefilm can and will do more.

Now I'll turn to the tax credit programs. Since we introduced our tax credit programs, similar tax-based measures have been implemented in many of the states in the U.S., and in other countries. The fact that they have been so actively replicated elsewhere is testament to their effectiveness; however, they are not perfect. We believe that by making relatively minor tweaks in two areas in particular they can be more effective and more efficient.

First, as you may know, all forms of public assistance are currently netted out of the calculation of federal credits. We call this the grind. This effectively reduces the net value of the tax credit for producers and therefore the size of budgets. We believe that by eliminating the grind, the additional resources could be used to enhance the competitiveness of Canadian content, build stronger corporate capacity, and ultimately lead to the creation of more jobs.

Second, because of their nature and design, a certain portion of the value of the tax credits is being siphoned out as a result of producers having to interim finance those credits through financial institutions until those credit amounts are paid out by the Canada Revenue Agency. Delays in payouts are directly related to the complex process and redundant audits and approvals. On top of the grind, the net value of the credit for producers therefore is effectively further decreased by the set-up fees and interest costs charged by banks for bridge financing these credits. This is an inefficiency in these programs.

We would therefore fully support a recommendation that would encourage the departments of Canadian Heritage and Finance to establish a small public-private working group with the specific mandate of finding an effective solution to this issue and implementing that fix as quickly as possible.

Before moving on to speak about promotion, we would like to raise with the committee another big picture issue, something which we need to do to further enhance efficiency and reduce costs for everyone, and that relates to red tape. We need to find ways to reduce it. It strikes us as odd that a producer is required to file the same paperwork on the same project four or five times with various government authorities, each of which has its own set of procedures, templates, and auditing and reporting requirements. Surely there is a way to reduce this inefficiency without compromising good governance or accountability.

We would welcome working with the key federal institutions and programs to address the red tape issue. We believe this committee can be instrumental in ensuring this happens by making a recommendation to government in this regard.

[Michael Hennessy]

Thank you, Jennifer.

The main focus of government intervention over the last 50 years has been on the supply side of the industry. When one seeks to develop a new or young sector, it makes perfect sense to stimulate first and foremost the creation of product, but we are a long way from where we were five decades ago. We now have an industry capacity able to generate $1.2 billion of feature film production each year.

The world of media, however, is changing rapidly and traditional business models are being fundamentally impacted. New technology enabled largely by the Internet and wireless capacity has led to a proliferation of options for consumers to access filmed content. Canadians, and indeed audiences in all leading nations, are not the passive viewers they once were. They are very much engaged in actively deciding what they see and how and when they see it. The entire audiovisual paradigm is shifting from one that was supply side oriented to one that is very clearly much more demand side focused and controlled by the consumer.

For our industry to prosper well into the future, it is critically important that we at the very least maintain our current level of capacity and enhance our competitiveness by maximizing efficiencies in the system. That alone, however, won’t be enough in the long run. The industry, working in partnership with government, must begin, and do so very quickly, to place more emphasis on promoting the value of our industry. This entails several things.

First, it's important that Canadians fully appreciate our sector and the content we produce. Canadians don’t generally know what content is Canadian or what was filmed here in Canada for consumption internationally. They should know, and I’m certain that if more Canadians did know, they would have an enhanced sense of pride knowing that the work was done right here in Canada by Canadians. Greater promotion and education in this regard would also have the added benefit of raising awareness of the job opportunities our sector offers for the next generation of creative minds.

Second, the growth and success of our sector going forward will increasingly hinge on our ability to promote the value of our industry in international markets, including the quality production services we offer. To grow our industry, we need to attract greater financing from international markets and we need to sell more Canadian content abroad.

More resources, therefore, dedicated for export development to help producers do more business in both established and emerging markets internationally would go a long way to stimulating more exports and to attracting more inward money. We believe you can help in this area by making a recommendation for the departments of Canadian Heritage and International Trade to work with us and others in the sector to develop an international promotion, trade, and export strategy, and dedicate the necessary resources to executing such initiatives.

Let me just say in conclusion that we've achieved a great deal of success with our feature film industry since the late 1960s, but we can and should do more to continue growing our industry and creating more jobs for Canadians. We can and should maximize our tax credit programs and reduce to the bare minimum the inefficiencies that currently exist, including that caused by red tape. We can and should incent television broadcasters, particularly the CBC, to more actively finance and promote Canadian films. We can and should place more emphasis on promoting the value of our sector to Canadians and to the rest of the world. We can and should capitalize more fully on our export potential.

Mr. Chair and committee members, I say we should, and with your help I know we can.

We'd be happy to answer your questions. Thank you.

[The Chair, Conservative, Gord Brown]

Thank you very much.

We're now going to move to the questions. We're going to go to Mr. Young for seven minutes.

[Terence Young, Conservative, Oakville, ON]

Thank you to everyone for coming here. We have great ideas here. This is the exact kind of thing we were hoping to get when we initiated this study, so thank you very much.

Our Prime Minister just announced—and I haven't seen all the details yet—a program to help small businesses export into other markets worldwide, so you're certainly talking our language.

I wanted to ask Mr. Séguin a question.

Could you please define what a program of national interest is? Maybe you could give us some examples and then tell us how this three-year pilot project that you're suggesting would work.

[Marc Séguin]

Thank you for your questions. Let me deal with one and then the other.

Your first question is on programs of national interest. It's a category that the commission has identified as essentially high-risk programs that are under-represented in our broadcasting system. They are typically expensive to produce. There are several genres that fall into that category. There's drama, obviously. Kids fall into that category. There's long form documentaries. I believe there are award shows, if my memory is right.

[An hon. member]

What about film?

[Marc Séguin]

Film qualifies as drama as well. That's right.

That's your first question.

With respect to your second question, we have developed an incentive program that we've recently tabled with the Canada Media Fund, which essentially has two components to it. The end goal of this incentive would be to re-engage broadcasters to help finance Canadian films. There are two components to our proposal.

The first component involves adjusting the minimum licence fee threshold to access the fund. The reason we've developed that particular component to the proposal is we found that the current licence fee threshold that is applied to feature films—and to be clear, feature films are eligible under the Canada Media Fund.... The reason the Canada Media Fund has supported very, very few films in the past is that the current licence fee threshold, which is a minimum to access the fund, is way too high compared to what currently is being paid in the marketplace. That's the first component.

The second component involves modifying the calculation methodology that is used by the Canada Media Fund in creating the envelopes. The notion behind that component was essentially to level the playing field between the audience success that a film could achieve and that which can be achieved by, let's say, TV drama. A TV series could have 12 episodes a year—that's 12 episodes that generate audience—but a feature film is a one-off deal. We are proposing a multiplier to level that playing field in the calculation methodology of the envelopes under the fund.

Sorry, that was a bit long-winded.

[Terence Young, Conservative, Oakville, ON]

No, it was very helpful. Thank you.

Mr. Hennessy, I wonder if you could comment in general on what is the hardest to find in growing the industry. Is it hardest to find stories and scripts, or actors and performers, or facilities, or financing, or something else?

[Michael Hennessy]

I can also quickly pass this to our producers, but my sense is that financing is always the challenge.

I think we have some incredible talent in this country. In fact, we make TV shows and films, particularly for Hollywood, and 95% of the people working on set are Canadian. The talent is there. The financing to get up to the scale where you compete with the U.K. and the Americans is not.

[Terence Young, Conservative, Oakville, ON]

Mr. Pope, did you want to comment on that?

[Paul Pope]

The short answer is “all of it”, but financing is certainly a major issue.

[Jennifer Jonas]

I would add to my esteemed colleagues' remarks that aside from the difficulties of procuring financing, another challenge facing the production community is access to screens, both big and small. You've had other witnesses, and we've mentioned here today, the fact that there has been a dramatic decrease in the broadcasting of Canadian feature films, especially English-language Canadian feature films, because of the ways that the big screen exhibition system works. With so much weight given to the Hollywood product, it's hard for Canadian features to access screens, big and small.

[Terence Young, Conservative, Oakville, ON]

Thank you very much.

Mr. Hennessy, I liked what you said about Canadians not generally knowing what content is Canadian or what was filmed here in Canada and that they should know.

I appreciate your suggestion. How might something like that work? How can the government help promote awareness of Canadian films to Canadians?

[Michael Hennessy]

I think there are a couple of ways. The CRTC took a step the other day in talking about how we may have to repurpose some of the money off the screen into promotion. I know Telefilm, which is coming up after us, is going to spend time talking about their promotional activities.

Part of it is ensuring, and it goes into our export strategy, that there is presence at what are called markets around the world, where products are developed and also sold. We have spent the last three years travelling to a lot of countries with Telefilm and the Canada Media Fund to promote the industry. A lot of our major producers now spend as much time out of the country as in because they realize the importance of selling to the globe.

The number one thing is to ensure that people have the ability to travel to markets, and have programs that can help finance delegations coming to this country to do co-production activity or to take advantage of the opportunity to film products, as Hollywood does, in the country. Because of the labour market we have in this country, and the locales, skills we've developed, it is an incredible opportunity to bring investors to the country if we can create programs that finance trade delegations coming in.

[Jennifer Jonas]

If I may also add to that, with respect to promotion and visibility within Canada, re-engaging broadcasters with feature films would also very much help with that. By far the largest forum for viewing feature films in Canada is, eventually, on the small screen. The more help we have from our broadcasters, both public and private, to help promote the existence of these Canadian feature films, the more aware Canadians will be of them.

[The Chair, Conservative, Gord Brown]

Thank you very much.

We'll now go to monsieur Nantel pour sept minutes.

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

Thank you, Mr. Chair.

Mr. Séguin, since you are fluent in French, I'll ask you the following question.

I obviously really liked your informed comment about Telefilm Canada's work. That organization has been very innovative and has been thinking outside the box in its support of the industry.

You also talked about CBC/Radio-Canada and replacing Hockey Night in Canada, for instance, with a movie night. In Ottawa, a number of my parliamentary colleagues are enjoying those movie nights. That's definitely an interesting idea.

You said that this kind of programming is needed more on the anglophone side because the Quebec film industry is healthy. Do you feel that the CBC provides less support for the film industry than Radio-Canada does?

[Marc Séguin]

Thank you for the question, which I would be happy to answer in French.

It's clear that, in Canada, the francophone film market works much better in some respects. First, that market has natural advantages because it is small and there is a lot of overlap between film and television production. The Government of Quebec also provides significant support for the industry.

Radio-Canada strongly supports feature films in Quebec, but I can't say that the same is true on the anglophone side. The CBC very rarely supports English-language films. The anglophone Canadian market is extremely competitive and foreign films—mostly American—have much more of an impact.

[Jennifer Jonas]

The answer to your question is very clear. The SRC participates in the Quebec film industry by granting licences and making investments, but the CBC is no longer doing that in English Canada.

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

I'm not surprised to see such a thing. I celebrated St. Patrick's Day at Concordia University last week, and I was in a meeting about the CBC. I played them the two-minute ad that Radio-Canada airs to show its support and enthusiasm about movies, and they said they haven't seen this in English.

On page 11 of your presentation, you refer to the international markets and how we could better promote our cinema. Would you think that consulate work, which has a cultural mediation aspect in the embassies and consulates, is something we should consider redoing?

[Michael Hennessy]

Yes, or refocusing; certainly the job of the consulate in Los Angeles right now is huge. They cover the whole southwestern United States. Their priority out of Los Angeles is tech and biotech. So more focus there....

We had great support at the Berlin film festival from the consulate in Berlin. In fact, they helped us this year when we took a trade delegation of emerging film producers to Berlin. It's really critical to have that presence on the ground of people who are well versed in the industry.

You know, I always like to think of entertainment and information technologies and the content that's produced as really the currency in the information age. It is not only of cultural significance, but it is also of economic value both in terms of jobs in the country and in terms of exports.