Small’s beautiful as big boys crash

Midsize firms hang on in tough production times

A correction was made to this article on Apr. 27, 2004.

TORONTO — Fireworks Entertainment fizzled out in April, and Alliance Atlantis iced its production division in December — so what does the future hold for TV production north of the border now that the big boys have pulled out?

“I think it’s correct to say the independent sector, such as it is, is the sole engine of production in Canada now,” Laszlo Barna muses.

Barna is chair of the Canadian Film and Television Production Assn. and co-founder of Barna-Alper Prods., maker of the popular TV series “DaVinci’s Inquest,” and one of the larger production firms still standing.

Others include Galafilm Prods., Decode Entertainment, Epitome Pictures, Pebblehut Too, Shaftsbury Films, Temple Street Prods. and Cookie Jar (formerly Cinar.)

They are relatively small, with annual production slates topping out at just $30 million to $50 million, but they’re the biggest that Canada has left.

“This is a core group of experienced companies who have proven over the years that they can survive and thrive in this environment,” Barna says. “We didn’t lose C$200 million, and we don’t have to writedown C$200 million.”

He is referring to the huge writedown, $149 million in greenbacks, that CanWest Global Communications announced when it put what remains of Fireworks on the block.

Fireworks was purchased amid much fanfare in 1998 for $30 million as Winnipeg-based CanWest’s production and distribution arm. The company, which at one time had offices in L.A., Toronto, London and Dublin, depended heavily on the syndication market.

But with the international market in decline, CanWest has been ramping down the division over the past year. Fireworks founder Jay Firestone ankled in May, and CanWest narrowed Fireworks’ focus to the North American TV market.

The company says its subsidiary Global Television will continue with some TV series production for itself as well as with ongoing productions like “Wild Card” and “Strange Days at Blake Holesy High.” The fate of series such as “Mutant X” and “Gene Roddenberry’s Andromeda” is uncertain.

In short, there was little left to cut.

The same goes for Alliance Atlantis and its production division, which now only co-produces the “CSI” TV franchise.

Bell Globemedia’s CTV Network sold off what was left of its production arm in December, when Artisan was taken over by Lions Gate.

Although the Canadian system is propped up by government subsidies and incentives, license fees are the lowest in the English-speaking world, and even the most successful producers can expect to pull in a profit margin of just 3%-5%.

These kinds of returns won’t do for publicly traded companies such as Alliance Atlantis, CanWest Global and Bell Globemedia.

Those who have stayed in the game have done so because they’re nimble and, Barna says, because they have no choice. “We aren’t going anywhere. We don’t have the option of retreating into our broadcasting division.”

What they are missing, however, is the TV distribution divisions of Fireworks and Alliance Atlantis that allowed producers to close the financing gap and recoup money down the line.

There are still a few larger distributors, such as Nelvana and Cookie Jar, which focus on children’s television, but the business is left now to eight or 10 smaller players — and many of these have had to pull in their belts a notch.

Minds Eye, a Regina-based distributor and producer, downsized after entering into creditor protection last summer and re-emerged leaner in December.

“What happens in a downturn is you sit back and regroup,” says chairman and CEO Kevin DeWalt. “Some don’t make it, but the ones that do get through the downturn and refocus and restructure are going to be that much stronger for it.”

DeWalt was at the Mip TV mart in Cannes at the beginning of April, where he believes he saw signs the market has bottomed out and will climb to about 80% of 2001 levels over the nest few years.

Producers and distributors that continue to weather the storm are in a position to benefit.

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