Tuesday, March 11, 2008

MONEY FOR NOTHING AND THEIR SHOWS FOR FREE


Like any business, creating film and television depends on money. Our money arrives under a number of pseudonyms; network license fees, foreign sales, Telefilm loans, grants, tax credits and private investment. Little gets made without a mix of most, if not all, of these different funding streams.


Cable Honcho Jim Shaw recently suggested he doesn't feel he's gotten his money's worth from the millions his semi-monopoly contributes to production and the furor over C-10 gave those who don't like seeing public money invested in the Arts an opportunity to express their dissatisfaction with what we produce.

And while taste is always subjective and nobody will ever create anything that makes everybody happy; the debate begs the question many who make the shows constantly ask -- "Why hasn't the hundreds of millions of dollars poured into our world created a viable industry -- where is all that money going?"

My last posts in this realm followed my personal journey through financial reporting and creative accounting to find out what happened to money I felt I was owed. Hopefully, illustrating how it is owed to thousands of Canadian creatives, and begging somebody in authority to help us get the real numbers out of the secret vault where they are stored at Telefilm Canada.

There will be some more of that today, along with material I've gotten from other producers which basically proves something I've been saying since my first days in the blog world...

The single greatest element holding back the Canadian television industry are our own Broadcasters. Because this small group, which benefits most from the work of our creative community and the largess of the average taxpayer and cable mogul, financially contributes the least to producing Canadian television and in some cases doesn't pay anything at all.

Yep, the same folks whom "public policy" has anointed the gatekeepers of our culture have enriched themselves while simultaneously impoverishing our artists and short-changing the audience they have been licensed and mandated to serve.

It'll take somebody way smarter and far better connected than I'll ever be to unravel the web of political deals and backroom wrangling that put us where we are today. But there is no denying that we live in an environment where our Broadcasters do not need ratings success to survive or cultural contribution to benefit from government support. And they all enjoy state sanctioned territorial and genre protections which ensure that they will never face any real competition.

Thumb through the hearings of our broadcast regulator, the CRTC, and time after time, you will find evidence of hundreds, sometimes thousands of interventions, counter arguments or appeals for logic turned aside for more or less what the Broadcaster wanted in the first place. They own the Commission and anyone who doesn't choose to believe that is a fool.

Others here and here in the Canadian production community have been discussing ways to overcome our apparent inability to develop and sustain popular programming. But having done too many cop shows, my first question on arriving at the scene of that crime is to ask "Who benefits from this?" and usually that means you start following the money.

So, let's start with tax credits...

Allow Jim Russell, a partner at Heenan Blaikie LLP and expert at entertainment law explain them as he did in last Saturday's National Post...

"When the tax credits were first brought in, in 1995, the rationale was that they wouldn't be included in the financing plan for a show. They were designed to allow producers to build up their equity in their company between projects. And it took all of about two seconds for broadcasters, distributors and other stakeholders to say 'No, producer, that's your skin in the game'."

You can read the full article by Joseph Brean and its well-written primer on Canadian film financing here.

Prior to 1995, Canadian networks paid license fees on a par with the rest of the world, that being 60% of the total cost of a program. This meant for an average $1 million dollar hour of drama, the broadcaster would ante $600,000; receiving in return the right to all domestic broadcast revenue and usually a percentage of equity in foreign sales or future earnings.

With the advent of tax credits, the Broadcaster contribution dropped to around 20%, or $200,000 for that same hour with the same benefits in return. In other words, $400,000 in taxpayer and cable mogul money replaced their own investment without impacting their earnings.

Now this was specifically forbidden when the tax credit system came into effect. Yet it goes on every day and the Canadian Film and Television Producers Association (CFTPA) and others reminded the CRTC of that fact during last month's CTF Hearings. But it didn't change anything.

So your tax dollars and cable fees continue to be used to reduce the costs of Canadian Broadcasters in order to increase their profits.

And, in case you haven't noticed -- there never seem to be any profits to be shared with either the people who made the show or you guys who paid for it.


Even with this enormous windfall, Canadian broadcasters continued to moan about how "expensive" it was to create Canadian programming, although they had reduced their actual spend to less than what they typically pay to acquire a similar hour of imported entertainment.

It could be argued that this "abuse" of the tax credit system actually counters any benefits that could accrue to the Canadian production community because it frees up more Broadcaster money to purchase more expensively produced fare from Hollywood.

And let's not forget that this programming arrives with the massive cross-promotion campaigns of the American media behemoths (saving our broadcasters those expenses) as well as providing them the opportunity to simulcast and thus artificially inflate their own viewer numbers so more money can be charged Canadian Ad buyers for commercial time.

That's a pretty nifty business model! Could you blame anybody who might suspect that the CTF rules aren't enforced because some of those profits are making sure the guys who legislate and regulate the system don't mess it up too much?

Meanwhile, Canadian producers are left struggling to create programming that can compete with these imports on a fraction of their budgets. And when they do manage to create something that might do that, their own broadcaster doesn't usually promote it because that too is money out of their pocket.

So we have the odd scene of CTV executives appearing before the CRTC to declaim their dedication to Canadian content like the recent MOW "Mayerthorpe" while promoting the film only on CTV in unsold ad slots -- and only for one week.

But this system gets much darker when you look at how Broadcasters spend their CTF envelopes in development. Let's take Global, where more than one producer has told me they sailed through the initial script stage (funded by the CTF envelope) and received the standard 20% license fee guarantee -- and were then instructed to make an American sale that would trigger said license fee.

About a year ago, I had a similar conversation with a Global Exec interested in a project we had scripted and packaged internally, indicating a possible commitment once I got an American sale. I remember thinking, "I get an American sale, I won't need Global."

To get CTF funding for production, however, producers must deliver 10 of 10 Canadian Content points. Try to convince a foreign broadcaster to put up a significant chunk of your financing under terms where they have no creative elements in play. Most will decline to avoid the headaches they'll inevitably get from their own production communities.

It's not un-doable, to be sure. You might be able to convince a Canadian actor who's well known in the US to play your series lead, or find Canadian directors with network approvals there to take the reins. But those people don't usually work for the kind of money your broadcaster has stipulated as their max.

Many projects developed with taxpayer and cable mogul money, therefore, languish in limbo because the pieces required to get them on the air just won't come together. Indeed, there's one series which Global announced for its 2006-2007 season which still hasn't gone into production for just these reasons.

You'd think the network might've loosened the cuffs with a promised air-date looming. But serving the audience isn't the point. No more than it is making the most efficient use of the "free money" in that development envelope.

Nope, getting somebody else to pay for the show is what all this is about. Believe it or not, there are producers who've had scripts developed with CTF funding, who've been told their license fee won't kick in unless they come back with a US sale and an American setting for the series and an American star.

If that's how a Canadian network wants to spend their own money, I think most people would offer little more than a shrug of disinterest. But I'm not sure such goals were ever in the spirit of the publicly funded CTF.

Although it might explain why CanWest reps at the CRTC were so gung-ho to be able to use their envelope for 8 of 10 or even 6 of 10 shows. They've undoubtedly got a ton of 'em ready to roll.


What all this really highlights is that Canadian content is seen as an unfortunate cost of doing business for our broadcast partners. An "onerous" cost, as CTV has termed it. And like anybody who has to pay for something they don't feel they should have to, they spend as little as possible.

Back in the 1990's, I wrote and produced a series called "Top Cops" that ran for 4 seasons on CBS. It cost about the same as most high action hours of the time and each episode ran once as an original and once more as a repeat during the network season.

So imagine my surprise about a month into the second year of production when I got a call from an accountant I'd never heard of at CBS. "Where do we send the writer money?", he asked. I told him that the writers were Canadian and paid out of the production budget. "No!", he said, "Not their script fees. Where do we send the residuals -- royalties -- whatever you guys call 'em?".

I gave him the address of the Writers Guild of Canada and the next morning the Guild received a check for "the writers" totaling several hundred thousand dollars.

I think this stunned the people at the Guild as much as it did me. I'm not certain if it was the first time they'd collected writer royalties from a Producer who didn't have to be hounded into compliance, but it was the first time I'd earned any. And on a series that only ran in two countries and mere months after the first round of repeats had been completed.

I'd written on shows produced by Canadian companies that had cost a fraction of the "Top Cops" budget and had sold in dozens of markets that were still forecasting losses for the next couple of millenia. And now there I was, barely into a second season, looking at a healthy five figure royalty check with my name on it.

Wow! Despite what everybody here told the government, you really could make some serious cash in this here show business.

And despite my expectation that this was a "once in a lifetime" event, those checks kept coming through all the remaining seasons and for about ten years following as the series went into syndication.

They ceased in 2005 with a nice letter from the network letting me know they had stopped selling the show. By then, even the final episodes were 10 years out of date and in their opinion, "no longer profitably marketable".

Gosh, a ten year stale date! I hope somebody mentioned that potential problem to those guys at Goldman-Sachs who paid millions for an even older and less hit filled Alliance Atlantis library...

Anyway, imagine my surprise a few months later when the series turned up on "Prime" and "MenTV", two Specialty Channels owned by CanWest. And by "turn up" I mean "Top Cops" was running eight times a week!

Now most of our stories were American, but apart from its two Executive Producers, the series was 100% Canadian, give or take a couple of US Guest stars ACTRA allowed us because we were hiring up to 200 of their members every week.

Therefore, "Prime" and "MenTV", at eight broadcasts a week, were qualifying most, if not all, of their required Canadian content from one series shot 15 years earlier.

Incidentally, there's another little regulatory glitch we might want to address if we ever get a CRTC member or two who isn't beholden to the broadcasters.

So, confident in the reality that CBS had obviously made another sale of a series long into profit, I expected another royalty check would soon arrive.

A year later, when it hadn't and CanWest had scheduled another season of eight-a-weeks, I asked the Writer's Guild to find out what was up. They tried. Nobody returned their calls or letters.

Naive in the reality of Canadian Specialty channels, I called the number listed for "Prime" and got an answering machine that accepted "viewer complaints". Wow, a legit specialty channel and the only phone connects to an answering machine...

What I later discovered is that if you have the right connections at the CRTC, you can get a broadcast license with little more on the production side than a satellite link, VCR, some kid to change the tapes and that answering machine.

This was further brought home on another occasion when I tried to contact the owner of the "Romance Channel" with a proposal, discovering she'd had the license for some time but wasn't close to launching and coudn't be reached because she was living in a Mexican beach house that didn't have a phone or electricity.

It really makes you wonder what load of crap the CRTC "bought" from her, or she "sold" them -- or however that all works. Check the dial -- still no "Romance Channel"...

But I digress.

Uncertain whether nobody was picking up the "Prime" answering machine or somebody just wasn't calling me back, I called CanWest, asked to speak to Legal Affairs and was transferred to a Lawyer at the National Post who didn't even know they owned "MenTV" but was game to take down my concerns and get back to me. He never did.

So, now we were into season two and nobody from CanWest was returning calls to either the WGC or me. I called CBS Legal, spoke to a lawyer who'd worked on "Top Cops" and he got back immediately to say that as far as LA was aware, the show wasn't on the air.

Okay -- so now I'm pissed -- because somebody is lying to me.

None of my previous paperwork from CBS showed sales to CanWest that they might be burning off years later. The Guild keeps trying, but nobody responds and they keep sending me emails verifying they're not getting anywhere.

And these Guild guys are being waaaaay nicer than I could ever be -- offering CanWest all kinds of outs like "we just need to know who you purchased the series from so we can contact them", which tells me that if CanWest had legitimately purchased anything, all they had to do is say "We got it from Bob!" and everybody stops bugging them.

But they don't.

And the eight-a-weeks rolled into season three, with "Prime" and "MenTV" meeting their Cancon requirements on the backs of a series nobody's apparently paid for.

And this stuff isn't just happening at "Prime". There are any number of producers who can't get answers about who provided their films for programming on the "Drive-In Channel" -- coincidentally, also owned by CanWest.

It could be all you need to run a Specialty channel is that link, the VCR, the kid, the answering machine -- and a Blockbuster Video card.

People -- this goes on all the time in Canada. Those of you who were avid viewers of those magazine shows which used to run on the CHUM/CITY networks may have noticed that several disappeared shortly after that entity was sold to new owners.

This was the programming the CRTC allowed Broadcasters to substitute for drama and comedy as Cancon in 1999. The story I'm told is that the new owners discovered that there were no releases for many of the clips that these shows used.

You see, you can use a scene from say "The Godfather" in a puff piece on the life of James Caan. All that's required is approval (a release) from whoever owns the movie. Sometimes, they'll give that "Gratis". More often they charge -- and that fee can be several hundred dollars for 30 seconds of material. But you pay it because if you don't, they'll sue your ass for far more than you originally would have had to pay -- and they'll win.

Yet it appears, even though the CRTC had granted our broadcast community the opportunity of substituting even cheaper production to meet their license requirements, one of them wasn't even willing to pay those costs.

In CHUM/CITY's defense, some say that the people charged with looking after clearing the material might have deceived the company. Although it's something you'd think somebody further up the food chain might've thought was important enough to track.

So there you have it. More tales from the sordid real world of Canadian television. You can't know how much I wish I didn't have so many of them.


But if you're reading this on a laptop in an LA Clearing House or in the Legal department of CBS, I'd consider checking out the content on some of those lesser known Canadian Specialty channels and going back a few years when you do. That economic downturn you've been fretting might just have a solution.

3 comments:

BlaineW. said...

I realize that you're sticking your neck out here in way that most would never but seriously, keep those stories coming. This stuff is gold. And I've never read it anywhere else before. I really think you should write a book.

synge said...

Oh, right on, Jim! Thank you so much for posting this! I couldn't agree more. What I find is so tragic is that people who legitimately want to make shows -- not just the writers, but the producers too -- have been fooled into this development game.

Broadcasters shovel a few development pennies into the community to keep them quiet. When the time comes to make the show, the excuses are myriad and almost always aimed at the "creative." This show is too big, too small, not the right audience, the scripts aren't ready, etc. Even when the notes are, quite frankly, CRAZY, the producers and writers take them at face value and then start to doubt their own abilities, instead of realizing that they are just jumping through hoops so that broadcasters can maintain the pretense that they are actually living up to their original mandates.

Personally, I'd be in favour of removing all the incentives... tax credits, funding agencies... as long as the broadcasters lost their monopolies as well. If they actually had to compete with U.S. channels instead of piggybacking on them, they'd have to start differentiating themselves and guess how they would do that? Why, they'd have to make programming.

Steve said...

Here's my question: why don't you, the producer, sue their asses? You hold (or represent) copyright, no?

I'm sure there's about eighty-five dozen lawyers out there willing to take on CanWest with something this outrageous. I bet half of them would do it for a percentage of back end, too, and not require a fee up front.