Canadian Heritage Committee on May 6th, 2015

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

Could the CRTC's decision on Canadian content, be it in films or on TV, have a negative impact on film production here?

[Sophie Prégent]

In terms of film production, I couldn't say. Our position is much more focused on Canadian content on TV.

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

Yes.

[Sophie Prégent]

To be perfectly honest, Mr. Nantel, I couldn't say when it comes to films. We'd have to examine that.

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

We'll talk later. Thank you.

[Sophie Prégent]

We can certainly talk later.

[The Chair, Conservative, Gord Brown]

Very good. Thank you.

Thank you very much to our witnesses. Thank you for your contributions. If you would like to make any further contributions, please get them to us in writing, preferably by the end of the week. Thank you very much.

We will briefly suspend.

[The Chair, Conservative, Gord Brown]

All right, we are going to call meeting number 45 of the Standing Committee on Canadian Heritage back to order.

Our witnesses in the second panel are all by video conference. From Toronto we have a mixed group joining us. We have Jim Mirkopoulos, the vice-president of Cinespace Film Studios, as well as Stephen Waddell, the national executive director of ACTRA. From Montreal we have as well from ACTRA, Sarah Gadon.

We're going to start with Mr. Mirkopoulos.

So you will have the floor for up to eight minutes, and then we will go to our friends from ACTRA, who will—

[Jim Mirkopoulos, Vice-President, Cinespace Film Studios]

Thank you, Mr. Chair and committee members, for the opportunity to share with you today our company's experience with the Canadian feature film industry. If this industry can be simplistically separated into production, distribution, and exhibition, it is the production space that we occupy, and I would like to speak to that today.

Our company, Cinespace Film Studios, has been running for 28 years. It's a family owned and operated film and TV studio business based in Toronto with three studio campuses, but now also has a large studio campus in Chicago.

ln the late 1980s, my senior family members, Nick, Larry, and Steve Mirkopoulos, were among the founders of the Studio District in east end Toronto. As such, we were all thrilled to be part of both Ontario's blossoming film and TV production industry, as well as hosting our share of high-quality domestic film and TV production. While the 67¢ dollar at that time ensured a steady stream of American service production into our facilities, early projects such as the CBC series Road to Avonlea and David Cronenberg's M. Butterfly demonstrated that we, as Canadians, were excellent at telling our own stories, and compelling enough to interest foreign markets in purchasing them.

ln more recent years, we have seen projects such as the bar-raising TV series Flashpoint and David Cronenberg's continued film patronage with Cosmopolis and Maps to the Stars. Speaking of those films, and as an example of our domestic legacy, later you'll be hearing from Canadian actress Sarah Gadon, who is with us today and who has been inside our facilities on 10 occasions in her young career, eight of these projects being Canadian.

I would be remiss if I did not report that the vast variety of Canadian film and TV projects that we have hosted over the years were directly a result of federal tax credit programs and initiatives such as Telefilm and the Canada Media Fund, which I congratulate you on, and I thank you for supporting this amazing industry.

We at Cinespace have always been able to host a mix of both American service clients and domestic clients over the years in our studios. Indeed, I believe that the high level of quality and service demanded by our American clients pushed both local technicians and local service providers alike to raise their game, and when these same crews had the opportunity to work on Canadian films, they had the refined skills to make these films better as time went on. And we at Cinespace always found ways to accommodate Canadian film projects, both in terms of availability and pricing. We established subsidized pricing models that saved on upfront costs for Canadian film producers, allowing them to put more quality on the screen and become more globally competitive from the get-go, thereby increasing their export potential and financial strength. This subsidized pricing model culminated in significant levels of repeat business from these Canadian film producers.

However, our industry has experienced seismic shifts in recent years. While 80% of our business used to be feature film and 20% episodic or TV series, today 90% of our business is episodic and only 10% is feature film. The same holds true in our Chicago facilities, where we host four prestigious prime-time TV series such as NBC's Chicago Fire and Fox's Empire, but no feature film projects at all. There has been a significant shift in the volume of content creation from film to episodic, due in no small part to the rise of Netflix and other digital platforms, and due to the major Hollywood studios cutting back their slates to adjust to a more unpredictable box office.

This is a perilous development from the perspective of trying to continue to accommodate film projects, because the more TV series we host, and the more successful they are in terms of renewals and multiple seasons, the longer they leave their sets standing in our studios, and the less opportunity we have to rent our studios to feature film clients, both Canadian and American. Realistically, however, this scenario is even worse for Canadian film producers, since their more modest budgets and typically last-minute financing arrangements make it prohibitive to book studio space well in advance.

Even leaving lower Canadian budgets aside, given our history of subsidizing Canadian projects, the recent shortage of studio space from the episodic wave has barred us from even getting to the studio pricing discussion. There are no longer studio space vacancy gaps, because we are now at 90% occupancy compared to a historic rate of approximately 65%, where we could accommodate Canadian projects in studio vacancy gaps and not incur large opportunity costs by turning American projects away.

So now we are faced with the problem of not having enough studio space to accommodate Canadian films, and many Canadian films not having the resources or the certainty to book studio space in advance. And even if they were to book in advance, it is no longer economically viable for Cinespace to continue to subsidize Canadian films without some firm equity participation or recoupment mechanism already included in the financing structure. lt is within that context that I would like to make a few humble recommendations with regard to Telefilm, based on our experiences and those of our producer clients.

To further develop our domestic film industry, there are two groups of film producers that Telefilm is trying to help—emerging film producers and established film producers. We at Cinespace are in the unfortunate position of finding it difficult to help any of them at this time with our subsidized studio pricing model, because we do not have the space available, and because we cannot structure an in-kind studio rental well in advance that provides at least the potential for a financial return with a piece of equity in the project.

We need the whole ecosystem improved in such a way as to generate more opportunities for us to help Canadian films, and more successful Canadian films, in order to encourage more help from other key service providers and investors.

My first recommendation is to have Telefilm engage directly with the key service providers that have silently subsidized these film projects, and have them consider entry into a formal public-private partnership. ln this way, windows of studio time, equipment, capacity, and so on can be reserved in advance for Canadian film projects in the pipeline in exchange for a piece of equity in the film project. Then Cinespace and other key service providers can economically justify the subsidized reservation of capacity in the face of heavy American business volumes that pay full rate.

Evidence given to this committee by producer Jennifer Jonas on March 23 suggested a public-private working group to sort out the federal-provincial tax credit grind. I would suggest that such a working group tackle the additional agenda item of identifying willing participants in a partnership to solidify infrastructure and capacity for Canadian feature film. Cinespace would certainly be the first to participate in such a partnership in order to continue our proud legacy of helping to produce Canadian film.

My second recommendation is specific to the group of emerging film producers that Telefilm is aiming to assist. These are the young cultural leaders of Canada who have inspiring ideas and visions, but limited resources. We at Cinespace have helped many of them over the years. While some of their projects were successful and others were not, the common thread is that they were so badly underfunded that their chances of a successful onscreen product were always grim. The general sense within my emerging producer clientele is that, much like Hollywood studios have reduced their slates in favour of commercial slam dunks, Telefilm should consider supporting fewer overall Canadian film projects, but do a more careful analysis of the commercial viability of these projects ahead of selection, and then increase the funding amounts to produce and market each of these projects. The film business has always been global, but now with the explosion of digital platforms there is so much product out there that Canadian films absolutely have to stand apart. Scale and quality are the keys to making this happen.

My third and final recommendation is specific to the group of established film producers that Telefilm is aiming to assist. These are the senior cultural leaders of Canada who have succeeded in projecting Canadian artistry and culture globally and whose standing attracts investor financing that Telefilm either serves to trigger or complete through the envelope system. These are the film producers that we absolutely need to succeed because they are a good bet to recoup money and provide a return to the Canadian taxpayer. However, recent changes to the Telefilm envelope system require these producers to spend 100% of their envelopes on a single film project, and this envelope amount must represent only 30% of the total budget. ln the case of a number of Canadian film producers, this requirement now pushes the budgets of their films to well over $10 million, which for a non-Hollywood studio project is considered a “dead zone.” This term refers to the fact that to repay their investors, these producers will require a substantial theatrical release component, meaning the shouldering of $2 million to $3 million in release costs in Canada and $40 million in the United States. This required increase spent on promotion, which could amount to more than the value of the actual film, creates a Catch-22 situation that can defeat the very purpose of the envelope system.

The general sense within my established clientele is that Telefilm should give them back the discretion on envelope spending limits. These guys are seasoned producers, with decades of experience in this industry, so they know exactly how to succeed in producing Canadian films. They just need to be given the flexibility to go ahead and do so, free from the bureaucracy but with the full support of the primary agency that's mandated to help them produce film.

ln closing, I want to thank you again for the opportunity to speak today. Most importantly, I want to thank our government once again for its stalwart support of the Canadian film and television production industry. The systems we have in place are commendable, but as detailed in my remarks there is considerable room for improvement.

[The Chair, Conservative, Gord Brown]

All right, thank you very much.

We'll now go to our friends from ACTRA.

You have up to eight minutes between you.

We're going to hear from Mr. Waddell first.

You have the floor.

[Stephen Waddell, National Executive Director, Alliance of Canadian Cinema, Television and Radio Artists (ACTRA)]

Thank you, Mr. Chairman, and members of the committee, for allowing us to appear before you today for this review of the Canadian feature film industry.

My name is Stephen Waddell. I am the national executive director of ACTRA, the Alliance of Canadian Cinema, Television and Radio Artists. Joining me, from Montreal, is ACTRA member Sarah Gadon. In addition to being recognized as one of the stars in TIFF's inaugural rising stars programme in 2011, Sarah has also graced the screen in a number of films and television series, including Cosmopolis, Antiviral, A Dangerous Method, Maps to the Stars, and the upcoming TV series11/22/63, which will be filmed this summer in Toronto.

Sarah and I are here today as the voice of ACTRA members, 22,000 professional English-language performers from across Canada. For almost 70 years we have represented performers living and working in every part of the country, performers who are pivotal to bringing Canadian stories to life in film, television, sound recordings, radio and digital media. Recently, we appeared before the CRTC as part of the Commission's Let's Talk TV consultation. Like all stakeholders from across Canada's recorded media sector, ACTRA spoke to the challenges our industry faces and the need to concentrate resources on areas where they'll have the most impact. Though the individual issues might differ from those of today's hearings, the underlying force that drives both of these endeavours is change.

Sarah.

[Sarah Gadon, Member, Alliance of Canadian Cinema, Television and Radio Artists (ACTRA)]

As professional performers we know this danger all too well. We've seen and felt firsthand the dramatic changes our sector has undergone. We know that standing still only means falling further behind.

Amidst the reality of shifting audience habits, revolutionary technological upheaval, and an ever-shifting global marketplace, Canadian content is not only critical to our national identity, but it aIso plays an increasingly important role in our nation's financial well-being.

Content creation is the essence of our digital economy. According to The Conference Board of Canada, Canadian cultural industries contribute more than $85 billion, or 7.4%, to our GDP, and more than 1.1 million jobs to our economy. Additionally, in a report released by the Canadian Media Production Association earlier this year, total production volumes related to Canadian content films alone, in 2013 and 2014, totalled $376 million and supported 8,100 full-time equivalent jobs. Foreign film production in Canada during that same time period accounted for $857 million and just over 18,000 full-time equivalent jobs.

lt's clear that culture is not a frill. It is a major industry based on renewable resources. Given the right tools, Canada's content creators and cultural industries will continue to play a leading role in economic innovation and growth, job creation, and the development of new digital technologies.

Stephen.

[Stephen Waddell]

Our presentation today will focus on three key points: first, the need for sustained, long-term investment in public funding instruments; second, the need to keep Canadian feature films Canadian; and third, the difficulties faced by Canadians in actually seeing Canadian films.

Public funding is crucial to helping our cultural industries attract private investment. The government must continue its investment in Canada's cultural assets by committing to long-term funding for the industry's economic drivers.

As a crown corporation dedicated to promoting the advancement of the audiovisual industry in Canada, Telefilm Canada supports the development, production, distribution, and marketing of Canadian feature films. Telefilm aIso administers Canada's co-production treaties and the Canada Media Fund's funding programs, and, additionally, Telefilm helps develop and promote feature films through its Canada Feature Film Fund. The spirit and intent of the CFFF is to encourage the promotion of Canadian feature films that have high box office potential while aIso supporting a wide range of genres, budgets, companies, and regions. Equally as important, each dollar from the CFFF triggers $2 in additional financing for digital media projects and $3 for feature film projects. Clearly the fund is an important economic generator worth supporting.

Unfortunately, since its parliamentary appropriation was cut by 10% in 2012, Telefilm has struggled to do more with less. We would like to echo the comments made by other presenters before this committee about the pressing need to fully restore Telefilm's parliamentary appropriation.

Sarah.

[Sarah Gadon]

Canadian feature films need to be Canadian. lt is crucial that the government maintains the current Canadian content requirements governing a production's access to public funding for the creation of Canadian feature films, such as the Canadian film or video production tax credit, co-production treaties with other countries, Telefilm feature film financing, and the Canada Media Fund.

Some producers and distributors have proposed that Canadian content requirements for leading performers be weakened to attract financing. This is absolutely the wrong approach to take. lt is impossible to build a dynamic Canadian feature film production sector by casting non-Canadian performers in all of the leading and challenging roles. Weakening the existing guidelines around non-Canadian performers in key roles would be detrimental to the Canadian film sector and make it impossible to successfully establish a distinctly Canadian voice.

Quebec has managed to develop a system for both its onscreen and behind-camera talent. As a result, Québécois directors are increasingly being sought after on the international scene. For example, the upcoming sequel to the classic Blade Runner will be directed by the award-winning Canadian director Denis Villeneuve, whom I've had the chance to work with.

English Canada needs to adopt this approach when promoting its own artists and creators. lt is vitally important that we Canadian performers be given the opportunity to develop our personal brands creating a virtuous cycle where suddenly having a recognizable Canadian as a lead helps to secure all the important financing.

Maintaining the Canadian Audio-Visual Certification Office's point scale is an important component for establishing Canada's star system, but it's only one part of the puzzle. lt is imperative that we aIso properly market and promote feature films both at home and abroad. If Canadians don't know about the great work we're creating, how can they be expected to watch it?

Homegrown, creative talent in Canada and in Canadian productions must be the norm, not just because it's the right thing to do, but because we need to continue to tell Canadian stories.

Stephen.

[Stephen Waddell]

Feature film funding in this country must place a greater emphasis on marketing and promotion. It's not enough to create Canadian stories and leave them on the shelf. They must be shared with the world. This means supporting Canadian feature films at home and abroad and finding new and innovative ways to help Canadian productions stand out from the pack and be seen. Canada sits on top of the world's largest generator of English language entertainment. Our physical proximity to the United States and our disproportionate population bases mean that all too often Canadians are overwhelmed by the sheer volume of productions from south of the border.

Outside of Quebec, getting Canadian films in front of Canadian eyeballs is a monumental challenge. The Ontario Media Development Corporation's 2013 industry profile showed that in 2012 Canadian English and French language feature films generated $27 million worth of revenues, or a 2.5% share of the national box office sales, which totalled $1.9 billion. In the English language market, though, Canadian features only captured 1.5% of total box office sales compared to American features, which made up 82.4% of sales.

There's an opportunity being missed here. Canadian creators are making award-winning feature films and the sad fact is that Canadian audiences never get a chance to see them because our cinemas are dominated by U.S. product. The CRTC has not helped either. By diluting its Canadian broadcast exhibition requirements the CRTC has taken away any incentive for Canadian broadcasters to air Canadian feature films. Our domestic feature film industry has suffered as a result of this decision. Instead of being exposed to Canadian stories, the stories that matter and resonate with us, Canada is little more than an afterthought to the American entertainment behemoth, which simply includes us as part of its own domestic box office. Until Canada reclaims, celebrates, and actively promotes the work being done within its own borders, Canadians will continue to have their own cultural heritage treated as second-best and not be given the opportunity to see distinctly Canadian films. It is crucial that we reform Canada's film broadcast and distribution sectors and give Canadians the opportunity to experience their own rich and diverse cultural heritage.

We ask this committee to consider our modest proposals for improvements in the funding and distribution of Canadian feature films, which must feature Canadian performers in leading and challenging roles in order to create distinctly Canadian films that Canadian and international audiences will want to see.

Thank you very much, Mr. Chairman.

[The Chair, Conservative, Gord Brown]

Thank you, and thank you for how you organized that presentation from both Toronto and Montreal.

Because we are short on time today, we're going to have a five-minute round and we're going to start with Mr. Young for up to five minutes.

[Terence Young, Conservative, Oakville, ON]

Thank you, Chair, and everyone, for your time today.

Mr. Waddell, we've talked about these issues before and I appreciate it when you come up for your annual visit to Parliament Hill to talk to members of Parliament. It's very valuable to us.

I wanted to ask you, how has the landscape changed for actors in the last 10 years? You talked about concerns with regard to marketing and Canadian films, etc., but what about actors? How has new technology impacted actors and their careers in Canada?

[Stephen Waddell]

As you identify, digital technologies have had a significant impact on production in this country. We actually see fewer feature films being done these days and, obviously, much more digital work being done.

Jim will tell you in his presentation that the amount of television production has significantly increased. We're getting a lot more television production here, but there's also new, original production for NetFlix, which we're seeing more of now, particularly in Toronto, which is great to see, and other SVOD outlets.

We found that it has also become, shall we say, much more democratic in terms of production. If I can be a little Marxian here, the means of production in many cases are now in the hands of the proletariat. With a little digital camera that costs what, 3000 to 5000 bucks, you can go out and produce a major production, a major feature film.

[Jim Mirkopoulos]

Sure.

[Stephen Waddell]

It's meant that there is definitely a lot more production. As far as professional performers are concerned, we're getting our share, but could get more. What we're finding too—and Jim and I were talking about this before we started—is that with TiP, our Toronto indie production program, or with our ACTRA indie production program across the country, we're providing the opportunities for filmmakers, actors, and performers to work together at much reduced rates, much reduced budgets. So there's far more production generally being done that engages professional performers.

Sarah, did you want to comment?

[Sarah Gadon]

Yes, sure.

This summer I will be starting production on 11/22/63, which is a limited series for Hulu. It is going to be the first production that I have been able to do that will be a part of a new digital media phenomenon. I see more and more of it happening. It is very attractive to actors who traditionally do feature films because there is no long-term contractual commitment for them. It is financially and creatively very attractive to us.

[Terence Young, Conservative, Oakville, ON]

Thank you.

We heard from film producers that there are times when they can take a Canadian story and get the money to produce the film by hiring an American star and then hiring a lot of other actors to play supporting roles. It was pretty clear that in many cases the film wouldn't be made without the star, who draws in the audience. Canadian actors are getting work by bringing in an American star.

You talked about the other side. We want to develop a Canadian star system. Mr. Waddell, do you recognize the balance in that, trying to build audiences and build our stars at the same time?

[Stephen Waddell]

Sure, we recognize that. It has certainly been the practice and policy to have predominantly U.S. performers in Canadian feature films and other Canadian content product for decades. I have been around for 45 years, and since McCabe & Mrs. Miller and Rambo, we've had U.S. product coming here, bringing in their stars and engaging Canadian performers.

What Sarah is talking about is the opportunity for her to be a star and have financing built around the production. The other advantage of it is that, with Canadian performers in the leading and challenging roles, you are getting a more distinctive product, something that is different from what the American studio system is putting out.

[Terence Young, Conservative, Oakville, ON]

Yes. We've heard that as a recurring theme and recognize that as well. That is an ongoing battle.

Mr. Mirkopoulos, the Ontario government recently reduced tax credits for the industry. It reduced the Ontario computer animation and special effects tax credit from 20% to 18%, and it reduced the Ontario production services tax credit from 25% to 21.5%. What impact will that have on your industry?

[Jim Mirkopoulos]

Unfortunately, it will have a negative impact on the industry. We are already lobbying the provincial government to give some retroactivity to productions that were already under way. Given that the vast number of projects in Ontario are episodic, these TV producers have budgeted potentially multiple seasons, and their spreadsheets are now far off with that 3.5% reduction.

The impact is negative. Certainly, Ontario has always been portrayed, quite accurately, as a stable, reliable jurisdiction in the eyes of Hollywood producers and our domestic producers. This specifically affects service production, and right now we have lost that image of stability. We are asking the government to reconsider and to offer some form of stability in terms of a timeline and how long we can depend on the credits at their current level.