Business

Canada rolls credits on a slump

CanadaVancouver (Canada)FinanceToronto (Canada)EntertainmentNational GovernmentTax Credits

There's probably no better barometer of Hollywood's presence here than Lynne McNamara.

Her thrice-weekly column, "The Backlot," chronicles filming and celebrity sightings around town in the Vancouver Sun. There's Halle Berry and Nicollette Sheridan dining at Gotham Steakhouse. Lucy Liu with friends at Savory Coast. Robin Williams sampling tapas at Bin 941. Burt Reynolds singing "Pennies From Heaven" at Rossini's, accompanied by Michael Moriarty on piano.

Just a year ago, soundstages here were half empty. Production in a city whose vibrant movie business earned the nickname "Hollywood North" had plunged to its lowest level in six years. A sagging U.S. dollar had erased many of the cost advantages enticing studios. Seizing the opening, other countries and states used incentives to poach work.

So British Columbia and other Canadian provinces answered with a fresh round of sweeteners layered on top of an already generous package. Now, studio lots are jammed until well into next year.

"As soon as the new credits were announced," McNamara said, "things just started to go crazy. It's nuts."

In the borderless world of movie making, the scramble over Hollywood's production dollars is a financial arms race of government subsidies. Eager to get the best deals, Hollywood skillfully pushes the ante up by playing off one another the myriad countries and states hungry for the dollars and glitz a film production generates.

"It used to be Canada and America," said Randall Emmett, a producer of "The Wicker Man" with Nicolas Cage and "88 Minutes" with Al Pacino in the Vancouver area. "Now, everybody is competing for the film business."

Added Ron Haney, executive director of the Directors Guild of Canada, Ontario: "Everybody can compete with tax credits now…. It's absolutely frightening."

For Los Angeles, global outsourcing could turn the city into something of a general contractor for feature films. Projects are often conceived and financed at studios in Southern California. But increasingly the actual moviemaking is delegated to such countries as Canada, Romania and Australia or states such as Illinois and New Mexico that actively court film work.

A brisk TV business and a rally this year in movie production are blunting the effect on the Southern California entertainment work force. Still, unions and film executives don't want to keep ceding the movie business that made Hollywood famous, and they are pushing state lawmakers to adopt a financial incentive program. Last week, Los Angeles Mayor Antonio Villaraigosa proposed waiving filming fees on city-owned locations to help stem runaway production.

If any country proved what a magnet government incentives are for Hollywood, it's Canada. The country has been the U.S. entertainment industry's foreign back lot of choice as producers discovered they could save as much as 30% with the right mix of favorable currency rates and government incentives.

"There's no doubt the tax incentives are definitely a carrot for us," said Spyglass Entertainment co-Chairman Gary Barber, whose company shot the film "The Pacifier" in Toronto and is now producing "The Invisible" in Vancouver.

Nathan Kahane, production president of Mandate Pictures in Los Angeles and an executive producer of the coming Columbia Pictures horror movie "The Messengers," said the film received tax credits totaling 50% of what was spent on local labor and materials in Saskatchewan.

"On a film in the $20-million range, seeing $3 million is huge," he said.

For Vancouver, the Canadian film resurgence has solidified its place as North America's third-largest center for U.S. productions, behind Los Angeles and New York. In the last two decades, the city has used its financial advantages first to attract TV series and then films. Producers found the U.S. dollar was worth as much as $1.60 in Canadian currency. British Columbia topped that with a rebate of 11 cents for every Canadian dollar spent on local labor.

One of the first studio complexes was built by a Hollywood producer, Stephen J. Cannell, who shot 1980s TV shows such as "Wiseguy" and "Stingray" in Vancouver. As more film and TV producers discovered Vancouver, the city further strengthened its hand by developing the skilled crews and production facilities Hollywood needed.

To the east, Toronto was using financial sweeteners to lure productions to build its own vibrant film business, with the city serving as a stand-in for New York in such movies as "Three Men and a Baby" and "Moonstruck." Nearly all of Hollywood's made-for-TV projects, which survive on thin profits, set up shop in Canada.

By 2003, production in Vancouver alone totaled more than $1.2 billion in Canadian dollars, or $950 million in U.S. currency then. Hollywood labor groups complained that $3 billion in production fled the U.S. annually, mostly to Canada, although Canadian officials called the number exaggerated.

For Les Erskine and about 35,000 other workers in the Vancouver area, it meant a good living. The 55-year-old gaffer, or chief lighting technician, found regular film jobs, including working on major movies such as 1988's "The Accused" starring Jodie Foster and the 2003 Will Ferrell comedy "Elf."

But as the U.S. dollar weakened, hampered by budget deficits and trade imbalances, Canada suddenly wasn't so cheap anymore. By last year one U.S. dollar was buying about $1.20 in Canada. Production spending on non-Canadian films plunged 50% in British Columbia.

To make a living, Erskine had to teach sailing.

"It was dismal," he said. "There was hardly anything."

With Canada's filming industry infrastructure at risk, thousands of local film and TV workers mobilized across the country. In Ontario, industry workers marched on the provincial Legislature, helping prompt an increase in its tax credit on labor expenses to 18% from 11%. Toronto went further, guaranteeing that producers would be charged just 78 cents for every Canadian dollar spent on city services.

Quebec and British Columbia quickly followed. In Vancouver, producers now receive 18 cents for each $1 of local labor costs instead of the 11 cents they previously reaped. The federal government upped its tax credit on local labor spending to 16 cents on the dollar, from 11 cents.

"Everybody has figured out what a great business this is," said British Columbia Film Commissioner Susan Croome. "We're not going to be less expensive than Romania, but what we need to make sure of is that when someone sits down and does the cost-benefit analysis, they realize we're the best value for the money."

Virtually overnight the new government sweeteners resuscitated Canada's film business. At Walt Disney Co.'s Miramax Films, John Hadity, executive vice president of production finance, largely credits the bigger tax breaks for the decision to shoot the $40-million sequel "Scary Movie 4" in Vancouver.

"If they wanted to be in the game, they had to do something," Hadity said.

The luxury Sutton Place Hotel, nicknamed "Central Casting," filled with stars again. Nina Ferentinos, managing broker of Unique Real Estate Accommodations Inc., which has rented homes to stars such as Jennifer Garner, Samuel L. Jackson and John Cusack for as much as $35,000 a month, had to move into a larger office to accommodate a 150% workload increase.

Lisanne Collett of Edible Planet Catering has been turning away work, too busy catering to crews on such films as Robin Williams' "RV" and 20th Century Fox's sequel "X-Men 3" with Halle Berry and Hugh Jackman.

"It's a good problem to have," Collett said.

At Vancouver Film Studios, Senior Vice President Pete Mitchell, a former British Columbia film commissioner, has a big white chart filled with red magnets, indicating all of the space booked by productions such as "X-Men 3." Mitchell's 10 soundstages were half vacant last year. He already has heard from producers of seven U.S. feature films eager to shoot in Vancouver next year.

"We're turning people away left, right and center," Mitchell said.

For his part, Erskine has returned to working as a gaffer. He recently wrapped up six weeks on Sony Pictures' "Hollow Man 2," his first steady movie job in two years, and expects to work on Hollywood productions through the end of the year.

Missing during this boom, however, is the cockiness Vancouver may have displayed two years ago. Chastened by last year's downturn, film executives here now realize how tenuous their business is.

At Lions Gate Studios, one of the largest facilities in Vancouver, President Peter Leitch is showing caution in case the business turns south again. The studio this summer dropped a lease on a 5-acre lot that supplemented its soundstages.

"We know we have to be globally competitive," said Leitch, who also chairs the Motion Picture Production Industry Assn. of British Columbia. "It's not that easy. Without the tax credits, we'd be struggling right now, big time."

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(BEGIN TEXT OF INFOBOX)

Northern exposure

Some of the U.S. feature films recently in production, or preparing to shoot, in Canada's provinces:

Locations (Studios releasing the films, if available, are listed in parentheses.)

British Columbia

"88 Minutes"

"The Cleaner" (New Line Cinema)

"Hollow Man 2" (Sony Pictures)

"Scary Movie 4" (Weinstein Co./Miramax Films)

"RV" (Sony Pictures)

"X-Men 3" (20th Century Fox)

"The Wicker Man"

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Alberta

"RV" (Sony Pictures)

"The Assassination of Jesse James" (Warner Bros.)

"September Dawn"

*

Saskatchewan

"Just Friends" (New Line Cinema)

"The Messengers" (Columbia Pictures)

*

Manitoba

"Capote" (Sony Pictures Classics)

*

Ontario

"Breach" (Universal Pictures)

"Killshot" (Roadshow Entertainment)

"Mr. Magorium's Wonder Emporium"

"Cheaper by the Dozen 2" (20th Century Fox)

"The Return of Zoom" (Sony Pictures)

*

Quebec

"The Fountain" (Warner Bros.)

"300" (Warner Bros.)

"Lucky Number Slevin" (Weinstein Co.)

"The Covenant"

Sources: Province film commissions and IMDb

Copyright © 2014, Los Angeles Times
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