Canadian Media – A Hard Look

Alright, we’ve looked at the origins of film and television in America. There can be no doubt the the USA has been the runaway leader in this area. So what has happened in Canada to try to keep up? It is very different. A history of Canadian media is more or less a government history rather than a tale of free enterprise.

In general, the Canadian film and television industry has been an outsource for American entertainment productions. For the longest time, the Canadian film industry has enjoyed it’s profits by attracting, via incentives, productions from the United States to be done in Canada, to the tune of over a billion dollars per year. The production aspects of true Canadian content have always struggled to keep up with the USA and Europe.

American box office revenues for films shown in Canada

We in Canada tend to see spending as a victory for our media industry, whether that be American spending or our own dollars. Why? Production spending increases tax revenue.

A 2005 review of the B.C. film and television industry broke down foreign and domestic spending to reveal about a third of spending on production was domestic. Yet clearly only 4.5 percent of box office revenue in Canada was generated for that spending. Spend 30% of the production money, make 4.5% of the box office??

In fact, the history of media production in Canada is much shorter than that of our southern neighbours. While studios were building massive infrastructures in the Hollywood of the 1920s, nothing much was happening north of the border. The same can be said during the rise of television following the Paramount anti-trust case in 1948. All the way up to the 1970s we see almost all of movies shown in Canada being produced in the United States.

Up to the 70s there are no major Canadian studios in operation. To give an idea of the situation, in the 70s an American one-hour drama episode would cost about a million dollars to create. A similar production in Canada would command a budget of one to two hundred thousand dollars. And that ratio has not really changed up to today.

An Agency is Appointed

As early as 1967 the Canadian government recognized how abysmally far behind Canadian content production was and formed an organization to examine the situation, called the CFDC. In 1984 this came to be called Telefilm, a crown corporation owned by the Federal government of Canada. The CFDC marks the beginning of the Canadian government’s attempts to create a “Hollywood North”, or a Canadian owned and distributed film industry. It comes about 40 years behind the American effort. The renaming to Telefilm was an attempt to roll television support into the organization, again, about 34 years behind Hollywood’s rapid adoption of the medium.

The creation of Telefilm in 1984 lead to the creation of the CTF ten years later in 1994, the Canadian Television Fund established to provide funding to Canadian television producers. (Don’t get confused, the CTF was originally the CPF in 1994, changed names to CTCPF in 1996, then again due to regulation changes to CTF in 1998)

The CTF received it’s funds from an odd public-private sector combination. In brief (because it gets messy here) the fund gathered money by charging cable companies who operate in Canada. A deal was made that allowed these regulated services to increase their fees, provided a percentage of the resulting revenue (5% of gross approx.) be placed in the care of the CTF for funding Canadian productions. This money would be matched by Canadian taxpayers (through the Canadian Heritage Foundation) to increase the funds to something useful in getting a Canadian media scene going. Ideally, they would also recoup some funds through equity ownership in the products created.

Now it Gets Very Messy

It’s a good plan, but not without problems. Firstly, the funds coming from the Canadian Heritage Foundation mean that typically projects which favor Canadian heritage are favoured for funding – whether or not those projects make money. This is very different from the Hollywood model, which pretty much always focusses on staying profitable.

Another problem that sprang up were serious allegations of corruption in the regulating bodies that administered the funds of the CTF. The gist of it was that cable companies were being allowed to overcharge their subscribers in exchange for contributing only a portion into the fund. It came to be called a “corporate welfare scam”.

In July 2007, a report entitled “Profiteering in the name of culture” was created by Keith M. Mahar and posted publicly on his website. In it, Mahar stated “when people get to the real heart of how close the relationship has been between the cable industry and the CRTC, they’ll want a public inquiry”.

Mahar had been performing a watchdog role on the CRTC and CPF from the time it was formed, and as early as 1995 won a legal decision against Rogers Cablesystems Ltd. regarding costs.

In 2007, at the prompting of two cable providers (Shaw Communications and Quebecor Media) the CRTC formed a task force to examine the allegations. However, the report was criticized for missing key information by Mahar and his legal team. Mahar’s 2007 report criticizes Canadian-content rules and points out that Canadian content should be any content made by Canadians. Furthermore it quoted Matthew Fraser, a former CRTC employee, who stated publicly “Created in 1968, the commission was already slipping into complicity with industry interest by the late 1970s. A decade later, it was totally captured.”

The damning report went on to point out that the original funding proposal came not from the CRTC, but rather the cable companies in a Feb 5 1993 notice from the CCTA (Canadian Cable Television Association). As soon as June of that year, the CRTC announced that the offer would be accepted and allowed the change of it’s regulations to allow cable companies to divert funds from Canadian’s fees to Canadian productions in exchange for increased cable fees.

In terms of numbers, the cable companies would collect approximately $684 million in revenue to generate $300 million in funds for Canadian productions. The main criticism was that cable companies were not required to do anything additional for consumers to collect the extra revenue.

There were also allegations that the fee increases were not allocated fairly, and that one cable company (Rogers) was allowed to increase fees more per subscriber than other companies (prompting two other companies to complain of unfairness and spark the inquiry in the first place)

The hole goes deeper and gets harder and harder to sort out. Quite recently, in 2009, the Minister of Culture James Moore announced that the CTF would be dissolved, it’s funds rolled into a newly created created organization, the Canadian Media Fund. Many speculated that this move was designed to give a fresh start to a fund that had become embroiled in problems.

At the end of it, one big question remains.

Why was all of this government action necessary?

The CRTC, CTF, Telefilm and all exist to try to shore up the vast gap that exists between Canadian media and American (even European) media. They provide funds that help get Canadian companies in the race for making high-quality productions. Yet at the same time, this “artificial profitability” can cause companies to have a distorted view of how well they are doing.

Typically, Canadian media companies have sought critical acclaim at awards over box-office success, since such acclaim would increase the odds of achieving further funding.

Perhaps it is time for a change.