Diversification is a key strategy for small Canadian film production companies to survive and thrive despite growing global competition.
"A variety of income streams should be the target of production companies these days," says Peter Lyman, senior partner of Nordicity Group Ltd. in Toronto, a strategy consulting firm serving the entertainment and broadcast industry.
Nordicity prepared the report on the future of television released in June at the Banff World Television Festival.
Diversification "does insulate Canadian firms in the global marketplace," Lyman notes.
|File photo by Larry MacDougal, Business Edge|
|Feature movies are just one part of a typical production company's menu, which can range from special effects to commercials.|
The popular image of production companies based on the old Hollywood model is of a company that does one thing only: Makes movies, or documentaries or television series.
But successful Canadian production companies today often have a menu of products and services, ranging from feature films and documentaries to producing television programs and commercials, providing special effects and software to developing new media such as electronic games based on television programs or motion pictures.
"Diversification of revenue streams has helped us," says Jamie Brown, a partner in Winnipeg's Frantic Films, which is riding high following the release of this summer's Superman Returns.
The studio developed 140 visual effects shots over 18 months of work, including computer-generated water surfaces so realistic insiders have asked whether the image is real or digital. Other feature film credits include X2: X-Men United, Scooby Doo-2 and The Italian Job.
Frantic Films offers visual effects, live action, commercial and software services under one roof. Costs are spread among the divisions and as business has slowed in one area, it's picked up in another.
The result: Annual revenue has grown to $9.2 million from $431,000 over the past five years - a time when growth of the production industry stuttered in different provinces due to the rise in the Canadian dollar, a downturn in global markets and a U.S. campaign to curtail foreign production.
Total Canadian production volume decreased by nine per cent to $4.5 billion in 2004-05 for the second year running, with decreases of 31 per cent in Canadian feature films and 23 per cent in foreign location shooting, according to a 2006 report by the Canadian Film and Television Production Association (CFTPA).
While some production companies were handing out pink slips during the downturn, diversified companies were able to grow. Now that it looks like the industry is beginning to grow again, those firms can quickly take advantage of the changing climate.
"We're looking at a very busy year on the television production and commercial sides of the business," says Brown.
Current television credits include Kitchen Crimes (Food Network) and 'Til Debt do Us Part (Life Network), with new series including the Devil's Brigade, about the Second World War Canadian-U.S. commando unit trained to fight behind enemy lines, and Almost Legal, a 13-part series on the first year on the job for four young lawyers.
The stable revenue stream has allowed the company to target U.S. studios with the biggest budgets, resulting in work on several feature films.
"We want to brand ourselves as the ones to go to (to create solutions) for the most complicated and difficult work," says Brown. The company wants a reputation for giving a special look and feel to each film, often using research and proprietary software.
Canadians are well suited today for competition in the global marketplace, Brown believes.
"Not all the wonderful things said about Canada are lip service," he said. "Crews work hard, and they have a positive, can-do attitude" that sets them apart from the competition.
Diversified companies are minimizing risks, says Guy Mayson, president of the 400-member CFTPA.
"Companies doing the most activity are into a range of things, they don't rely on one" revenue stream, he says. And diversity is typical of the Canadian industry, which has a healthy mix of Canadian content, foreign content and service production of television, feature film, animation, special effects, commercials and new media products.
There is no set mix, says Lyman. "Companies have to be alert to the new markets - international as well as new media and new platforms."
But it's probably a bad idea to diversify into feature films, which he describes as "labours of love" that never were lucrative outside Hollywood. "The key is to move where the market is going."
Nomadic Pictures of Calgary set out to make feature films, with its first effort, Hugo Pool, with Malcolm McDowell, Sean Penn and Robert Downey Jr. in the cast, released in 1997.
But a dry spell in 1998-2000 forced the company to diversify into television production.
"We only made one film" in that period, says company co-founder Chad Oakes, and "the switch to television took us awhile."
But they survived to celebrate their 10th anniversary.
"We've financed and produced or co-produced 25 movies to date, including five last year," says Oakes. Nomadic also provided production services for the mini-series Broken Trail, starring Robert Duvall.
The business has changed drastically, says Oakes, with smaller margins and producer fees. "The industry is fragmented, there are more cable stations, the advertising base is spread out. Networks don't make so many movies of the week anymore."
In Alberta, producers are working with American co-production more often to facilitate development of their own products, says Calgary film commissioner Beth Thompson.
Diversifying "gives you a sense of controlling your destiny a bit more," adds Chris Bartleman, co-founder of Studio B Productions in Vancouver, an award-winning animation studio that now has eight original animated series airing in 90 countries around the world.
Titles include Yvon of the Yukon and Being Ian on YTV, and Yakkity Yak and Class of the Titans on Teletoon.
The company started out doing service work, but then began making its own product. Now, it's investigating merchandising and licensing to capitalize on its huge library of cartoon material.
With shrinking margins and investment money, diversification is a way to grow, says Bartleman.
"It does cost money and time and people and infrastructure. You need to build a base and commit" to plans, he notes.
Even business newbies recognize the trend.
"Diversity is the way to stay open and operate," says Lori Lozinski, an associate producer in Vancouver. She's just starting her career and is working for a company that began as a documentary film production company and has now moved into television work.
"The reality is, you're not going to survive just being a film producer," says Lozinski.
Diversification can stabilize companies - and the whole industry, adds B.C. Film Commission spokesman Shawn Robins.
"I know how critical it is to create a base of expertise, to have experienced people" available when a studio comes knocking, he says.
(Sharon Adams can be reached at firstname.lastname@example.org)