Maintaing a Strong Canadian Owned and Controlled Market

Summary

1. One of the biggest challenges in the digital age is ensuring that that a portion of the money Canadians spend on digital content in any form or nationality remains in Canada to reinvest in the production of new Canadian content. The most effective way to achieve this is to reserve a portion of the Canadian market for Canadian owned and controlled companies. In the analog era this was successfully achieved with legislative "tools" like the Broadcasting Act and the 1988 Feature Film Distribution Policy. In the digital era these "tools" need to be revised or new ones introduced. An unregulated digital environment could eventually lead to most, if not all, of the money Canadians spend on non–Canadian content leaving the country with no benefit whatsoever to the Canadian industries that produce, distribute and market Canadian productions.
2. Most of the focus on Canadian content in these consultations has been on new forms of digital content. However older forms such as feature films and television programs will continue to attract large audiences and be an integral part of our cultural landscape. Government investment programs have been critical to the success of these productions. For feature films Telefilm Canada has been an invaluable partner providing investments in hundreds of Canadian feature films. In order to continue in its role in the years ahead Telefilm needs to be provided with enhanced government financial support and modernized co–production treaties.
3. Piracy has been a plague on the music and film industries for over a decade. As consumers increasingly turn to digital content and digital forms of delivery the threat of piracy will increase. It is critical that the Government of Canada react to new piracy challenges as quickly and effectively as possible.

Submission

13 July 2010

Introduction

This letter represents the views of the Canadian Association of Film Distributors and Exporters ("CAFDE") on certain issues related to "Canada's Digital Content" in the Government of Canada's Digital Economy Consultation. CAFDE appreciates the opportunity to provide these comments.

CAFDE is a non–profit trade association that represents the interests of Canadian owned and controlled feature film distributors and exporters. Our members include Alliance Films, Kinosmith, Maple Pictures, Métropole Films, Mongrel Media, Morningstar Entertainment, E 1 Films/Seville Pictures, TVA Films and Video Service Corporation. CAFDE members distribute over 90% of the nonstudio and Canadian films released theatrically in Canada each year. CAFDE members distribute films in Canada from all over the world and in the widest range of genres and budgets.

Maintaining a Strong Canadian Owned and Controlled Market

Since its inception the Canadian film and television industries have faced enormous challenges due to our relatively small population base and our proximity to the largest media market in the world. These challenges have been significantly overcome by a series of legislative initiatives and a wide range of financial support programs at all levels of government.

For the Canadian feature film industry one of the most important elements in its success has been the Federal Government's Feature Film Distribution Policy. Introduced in 1988 by the Mulroney government, the Distribution Policy was part of a series of measures intended to strengthen both the Canadian film distribution and production sectors. Among the main components of the Distribution Policy were guidelines that stated:

1. Foreign takeovers of Canadian owned and controlled distribution businesses will not be allowed.
2. New foreign owned and controlled companies would only be permitted to operate in Canada for the purposes of distributing proprietary films.

The distribution policy has been an enormous success. It has been instrumental in carving out an important part of the Canadian market for Canadian companies. Since its introduction the Canadian distribution sector has grown from a handful of "boutique" companies to a group of larger companies that have the experience, financial strength and market clout to properly release the widest range of Canadian and non–Canadian films.

As the Canadian distribution sector has grown it has made significant financial investments in the production and marketing of Canadian films that has augmented government financing programs. It is estimated that over the past 10 years Canadian distribution companies have spent in excess of $400 million in the acquisition and marketing of Canadian films.

In order for the Distribution Policy to be effective in the 21^st century it needs to be modernized to encompass digital distribution technologies like the internet and wireless networks. Digital distribution will also have a significant impact on the Canadian broadcast sector. In the years ahead Canadian consumers will enthusiastically embrace new business models than offer an increasingly wide variety of digital content. This new business models will initially enhance and eventually replace the current film distribution and broadcast structures.

An unregulated digital distribution environment will eventually lead to a weakening of Canadian broadcasters and film distributors. The ongoing viability of both Canadian broadcasters and film distributors is linked to their privileged access to non–Canadian content. This access allows Canadian broadcasters and film distributors to build the financial strength and stability needed to invest in new high quality and competitive Canadian productions. In the current environment a portion the money Canadians spend on non–Canadian film and television programs stays in Canada to strengthen the Canadian broadcasters and distributors who then invest in new Canadian productions.

As digital delivery of film and television programs is increasingly embraced by consumers it will represent a growing share of the revenue stream. Currently there are no restrictions preventing non–Canadian companies from distributing films and television programs directly to Canadian consumers via these methods. If this situation continues a growing percentage of money Canadians spend on films and television programs will leave the country. This will erode the financial stability of Canadian broadcasters and film distributors. It will also weaken the production sector, as less money is available for investment in new Canadian productions.

Because of its size and proximity to the United States the Canadian film and television industries have required a combination of legislative tools and direct government support. It is naïve to believe that an unregulated market will provide a more entrepreneurial environment for the Canadian film and television sector. It is also naïve to believe that non–Canadian companies tapping into the Canadian market will offer significant and consistent financial support to Canadian productions.

For the Canadian film and television industries to thrive in the 21^st century it is critical that Canadian broadcasters and distributors remain strong.

The Importance of Telefilm Canada

The most effective investment instrument for Canadian feature films for the past three decades has been Telefilm Canada. It would not be an exaggeration to say that without Telefilm Canadaʼs ongoing investments the Canadian film industry would barely exist.

The main focus of these consultations is on new forms of digital content. This is understandable and Canada needs to find ways to be globally competitive in creating new content. However feature films will continue to be a important and relevant part of Canada's culture and the challenges and opportunities brought about by digital technologies need to be considered in these consultations.

Production and marketing costs for feature films around the world have soared over the past decade and show no sign of slowing down. During that time period Telefilm Canada''s parliamentary allocation has declined. In order for Canadian films to be competitive they will need increased and ongoing financial investments from Telefilm.

CAFDE strongly supports the proposed co–production fund. This fund will provide Canadian producers with new opportunities to seek out a wider range of international partners. The fund would also leverage significant financing from outside the country.

In addition to a new co–production fund we believe that serious revisions need to be made to the existing co–production treaties to allow producers greater flexibility when working with partners in other countries. When compared with other countries, Canada's co–production treaties as well as its domestic Canadian content rules are antiquated and restrictive.

The box–office success of indigenous English Canadian films compares unfavourably to the indigenous films of the United Kingdom. However, the production treaties and domestic content rules of the UK are much more flexible than Canada's. Indeed many of the most commercially successful UK films would not qualify as UK films if they adopted Canadian rules.

In the years ahead the success of Canadian films needs to be appreciated and measured in different ways. For many years Canadians have viewed far more feature films (Canadian and otherwise) in the home environment than in cinemas. However for the past ten years the focus of the media and government has been on the box–office performance of Canadian films with little attention paid the much larger audience at home. We believe the success of Canadian films should be measured by how many Canadians see them rather than what box office percentage they achieve.

Piracy

Technological advancements have provided exciting new tools for filmmakers as well as opportunities to reach larger audiences with new distribution methods. However technological advancements have also brought about a worldwide epidemic in piracy. Piracy has crippled the music industry and has been a problem for the film industry for over a decade and grows in seriousness with each year. CAFDE applauds the Government for their recent actions amending the Criminal Code to deal with illegal camcording in movie theatres and for modernizing of the Copyright Act.

Those profiting from piracy have proven to be resilient and innovative and it is certain that new forms of digital content will suffer from this plague. We hope the Government will continue to make fighting piracy in all its forms one of its top priorities.

The Role of Government

The years ahead will bring enormous changes to the film industries in Canada and around the world. Many compelling arguments will be put forward suggesting that governments should get out of the way and let business and technology lead the way to the future. However the Canadian government, like all governments, has a critical role to play in ensuring that culture in all its forms is protected, supported and remains accessible and meaningful for its citizens.

Sincerely,
Canadian Association of Film Distributors and Exporters

Ted East
President