CHPC Committee Report

REVIEW OF THE CANADIAN FEATURE FILM INDUSTR BY THE STANDING COMMITTEE ON CANADIAN HERITAGE

LIBERAL SUPPLEMENTARY OPINION

Stéphane Dion
Liberal Critic for Canadian Heritage
June 5, 2015

On behalf of the Liberal Caucus, I give my support to the Committee Report and urge the government to follow through on its recommendations. Although the Report comes up short of tackling all the issues adequately, implementing it would contribute to improving the conditions under which Canadian feature films are produced, promoted and distributed in francophone and anglophone, domestic and international markets.

I would like to begin by thanking all those who took the time to share their views with the Committee by appearing in person and/or submitting a brief. I also thank the Parliament staff for their outstanding support, and wish to acknowledge the cordiality that prevailed between the Committee members.

The Committee Report leaves out several crucial aspects of the Canadian feature film industry. Thus the Committee partially failed to fulfill its mandate, which was to take stock of the progress made since its 2005 Report, "Scripts, Screens and Audiences: a New Feature Film Policy for the 21^st Century", and to make recommendations to the government regarding the financial assistance given to the Canadian film industry.

Based on the evidence heard at Committee, the Liberal Caucus considers it necessary to add four recommendations to the Report in order to meet the following needs:

• We must recognize Telefilm Canada's crucial role in any Canadian film policy for the 21^st century;
• We must study the possibility of moving ahead the payment date of tax credits to facilitate the closing of financing arrangements and improve the quality of government-assisted films;
• We must explore ways to foster the promotion of Canadian films;
• Given the important changes in the way feature films are "consumed" nowadays, it is imperative that reliable data be available regarding film distribution via over-the-top services.

1. Restoring Telefilm Canada's budget to its 2011-2012 level

As mentioned in the Committee Report, "the vast majority of witnesses readily acknowledged the key role played by Telefilm Canada in developing, producing and marketing feature films in Canada. Many of them raised the issue of the Crown corporation’s parliamentary appropriation, pointing out that Telefilm Canada reduced its budget by 10% over three years starting in 2011–2012." (Para. 46).

Among other witnesses, AQPM President Marie Collin praised the work of the Telefilm Canada leadership who, despite the government-imposed cuts, "attempted to touch the core of their operations as little as possible".[1]

Several witnesses from the distribution, production and investment communities[2] stressed the importance of reinvesting in Telefilm Canada, given its key role in the production and distribution of Canadian content.

The first Liberal Caucus recommendation reflects our agreement with the witnesses' views on the crucial role played by Telefilm Canada in the Canadian feature film ecology:

It is recommended that the government reinvest in Telefilm Canada.

2. Moving ahead the payment date of tax credits

Further to the central role played by Telefilm Canada's financial support of feature film production, many witnesses identified federal tax credits as the other priority instrument available to government to encourage the production of Canadian films and foreign films shot on location in Canada, which contributes to the sector's health, our artists' and technicians' competence and the retention of thousands of jobs.

The Committee report deals with one of the main preoccupations raised by several witnesses – the dilution of tax credits when provincial tax credits are taken into account (recommendation 2) – but it totally ignores another aspect of the issue that was raised by those same witnesses: the timing of tax credit payments. The payments are only released after the Canada Revenue Agency has received and examined the income tax returns. The delay reduces the value of the credits since until these are released, producers must borrow from financial institutions to fund their films. Since interests accrue on borrowed funds, there is less money for production, which can affect film quality.

That is why some witnesses[3] recommended that a portion of the payment be released right from the start and the balance after the final closure of accounts. The Liberal Caucus appreciates their arguments and therefore:

It is recommended that the Department of Canadian Heritage, in partnership with the Department of Finance, consider moving ahead the payment of 75 to 85 percent of the tax credits meant to support the production of Canadian feature films.

3. Promotion and marketing

Several witnesses[4] pointed out that one of the main impediments to the success of Canadian films is the lack of promotion and marketing resources. They asked the government to support commercialization activities on diversified platforms – including digital platforms – domestically and abroad. It was mentioned that the marketing budgets for US productions are often larger than Canadian film production budgets. Indeed, how can Canadians access the films that the government supports and that are internationally recognized for their quality if they have never heard about them?

It is worth noting that this theme had been discussed during the 2005 hearings of the Committee on Canadian Heritage and was the subject of a specific recommendation. Ten years later, and in the absence of any government action, the problem is exacerbated by the changes in the public's film consumption modes resulting from technological change.

Several solutions have been proposed. Some witnesses invited Telefilm Canada to include the availability of sufficient promotion and marketing budgets to its selection criteria. Several intervenors emphasized the important role the broadcasters have to play in that regard – particularly our national public broadcaster – given that Canadian films generally have very limited access to movie theatres.

Further to the fifth general recommendation included in the Committee Report, regarding the support the government must give to the marketing of those Canadian films it partly finances, one suggestion caught our particular attention: expanding the tax credit system to include marketing expenditures. Should this measure be adopted, it should be made to apply to innovative initiatives to promote Canadian films and woo the public. Therefore,

It is recommended that the Department of Canadian Heritage and the Department of Finance study the feasibility of making certain Canadian feature film commercialization activities eligible for the Canadian Film or Video Production Tax Credit.

4. Access to reliable audience data

Our ability to establish policies and programs that are relevant to current issues and cultural objectives relies on access to reliable and up to date audience data. Almost all of the witnesses we heard and briefs that were filed insisted that this is even more important now as new technologies have totally upset the way the public hears about film productions and consumes them.

It is essential to have hard data on new consumer habits with respect to the new distribution platforms. As mentioned by the Canadian Heritage representative himself at the beginning of the hearings, one of the challenges facing government institutions is to acquire "available, reliable and reasonable statistics" regarding online film viewing and the revenues generated on these platforms.[5] According to Telefilm Canada's Carolle Brabant, access to data on feature film viewing via over-the-top services "would enable us to know what more we could do to reach Canadians". The Liberal Caucus agrees with this opinion and therefore,

It is recommended that the Department of Canadian Heritage and the (CRTC) gather data on over-the-top services, with particular focus on consumer habits, availability of Canadian films, and revenues and expenses associated with these services.

Conclusion

The Standing Committee on Canadian Heritage Report on the Review of the Canadian Feature Film Industry results from a consultation that without being as comprehensive as the 2005 study, identified several issues of importance for the anglophone and francophone markets, and generated a number of very interesting recommendations made by interveners. It must therefore be thoroughly examined by the government.

The Liberal Caucus agrees with the Report but proposes to add four essential recommendations to it:

• Recognize Telefilm Canada's key role in any Canadian film policy for the 21^st century, by reinvesting in its capacity to fulfill its mandate and meet its objectives;
• Study the possibility of moving ahead the payment date of tax credits to facilitate the closing of financing arrangements;
• Explore ways to foster the promotion and marketing of Canadian films;
• Acquire reliable data regarding feature film consumption via over-the-top services.

Implementing the Report, thus amended, would foster the creation, promotion and distribution of Canadian feature films and help the whole industry tackle the challenges exacerbated by the digital era. Thus, the Government of Canada would be better able to support an industry that is important not only for our culture but also for our economy and our nation's international stature.

We strongly urge the government to take all the measures required to implement the Committee Report and Liberal Caucus Supplementary Opinion.