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Last Updated: Friday 19 February 1999 LOCAL BUSINESS
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Sustainability B.C.'s film challenge
The Vancouver Sun
Joanne Morgan Vancouver Sun
The value of B.C. film production soared 30 per cent last year over 1997 to $808 million, making the province the third-largest production centre in North America after Los Angeles and New York.
The total economic impact of the industry now exceeds $2 billion.
However, Rosalyn Kunin, an economist with the Laurier Institution in Vancouver says the industry is still relatively small both in terms of the numbers of British Columbians it employs (about 25,000); and in terms of the amount of investment it generates. Moreover, the investment and employment it does generate is not long-term.
B.C. Film Commission director Pete Mitchell says a big challenge for the industry is how to sustain and manage growth, taking into account the strain on existing crews and locations.
Based on scouting activity in the first two months of 1999, production levels will likely be exceeded next year, he said. The industry and government have taken steps to help alleviate the pressures of rapid growth, by encouraging more production to film outside the downtown core, putting in place training programs to expand the crew base and building stages to address the current studio shortage.
As the recent tax crisis indicated, however, the local production community has not established a unified strategy to manage long-term growth.
One roadblock to such an initiative is that major employers do not have headquarters here, as they do in the province's other major industries, Mitchell said.
Meanwhile, the budget of the B.C. Film Commission -- a government agency that attracts production companies to Vancouver -- has been cut by 30 per cent, a curious decision given that the province has doubled its production activity in just over than three years,
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All signals are go for an impending change in the ownership of a major post-production facility in B.C.
Last month, L.A.-based post production giant Four Media shifted into acquisition mode after selling 51 per cent of itself for $80 million US which, according to the Hollywood Reporter, will be used for "further acquisitions".
Part of that money likely will be devoted to acquiring a Canadian operation since companies such as Rainmaker Entertainment have moved on to Four MC's home turf in the last few years.
Rainmaker is vulnerable to a takeover with its shares trading at $2.10, especially given the favourable U.S. dollar exchange rate. Rainmaker's total market cap is only $23 million.
Toronto's Command Post, which recently purchased Vancouver's Post Haste facility, may also be up for grabs if the partners want to cash out.
On the other hand, these rival Canadian companies might be looking at uniting to defend themselves against an unwelcome suitor. A recent dinner between Rainmaker president Bob Scarabelli and Command Post's CEO Michael Flannigan indicates they are talking. Flannigan said the talk was mainly about Four Media Company.
"We know Four MC doesn't acquire anything small and they don't do start-ups," he said, "so that means Command and Rainmaker are the only companies in the running."
Would Command sell out? "We're traditionally acquisitors, not sellers," Flannigan said, "but sure, if the price was right. However, it would need to be a whole lot of money."
More likely, Flannigan indicated, is the sale of Rainmaker. "If they bought Rainmaker, it might be advantageous for us because there are lots of people in L.A. who don't like how Four MC does business."
Four MC's aggressive approach to acquisitions is so legendary in the L.A. post community the company is now being referred to as the The Borg (a reference to the dreaded character in the Star Wars: Next Generation series) whose motto was: "You will be assimilated; resistance is futile."
Roger Dent, media analyst with Yorkton Securities in Toronto, said he wouldn't be surprised if there was a takeover attempt afoot at Rainmaker, "but I don't think they'd necessarily welcome it."
Sandra Mays, vice-president of corporate communications with Four MC in L.A., confirmed the company has $52.7 million US available and will be able to leverage about $300 million for further acquisitions. When asked about the company's intentions in Canada, she said: "With the increase in production activity in Vancouver and Toronto, Canada certainly is of great interest to us."
If a takeover is in the works, look for some golden parachutes to start landing.
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The deadline passed quietly last week on the first go-round this year for applications to the Canadian Television Fund. This was in marked contrast to the fiasco created last year when producers had to get in line for the first-come-first-served funding frenzy.
Advance word is the money is being stripped quickly, but the good news is it will be more evenly distributed across the country.
The problem, however, is that a thinner fund means broadcasters will be hard pressed to meet their Canadian content commitments. Producers will be challenged to find more economically-produced programming.
A further complication is that all the money continues to go to producers with an established track record, so how is the next generation of producers going to get its start? It likely won't be through the help of the provincial funding agencies currently facing cutbacks or even their complete demise.
You can reach Joanne Morgan by e-mail at joanne@canadafilm.com
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