TV Commercials Also Lured by Canada

Los Angeles commercial producer Cindy Akins is shooting four television spots in Canada this month, lured by lower labor costs and a favorable exchange rate--the same factors that are driving film and TV production across the border.

The advertising business often doesn’t enter into discussions of how economics are driving movie and TV production to Canada. A recent study, jointly commissioned by the Screen Actors Guild and Directors Guild of America, estimated that in the last year, $2.8 billion worth of film and TV productions and 23,500 entertainment jobs left the United States.

No such study has been conducted for commercial production, which, though centered in Los Angeles, is dwarfed by Hollywood. But Canadian officials say U.S. advertisers have spent more than $100 million within the last year to produce commercials in British Columbia. Pete Mitchell, film commission director for that province, said American commercial production in British Columbia has been growing by 10% to 15% annually for much of the last decade. Such icons as Ford, Mattel and Coca-Cola have shifted at least some production work across the border.

And while Ontario does not keep statistics on U.S. commercial production, Mitchell estimated that an equal amount of work gets produced there.

Though British Columbia accounts for just 2% to 3% of the $4.5 billion spent annually on commercial production in the United States, the industry is concerned. That is because the business faces other economic pressures. As the cost of TV time increases, advertisers are shaving production budgets in various ways, such as making fewer ads than usual to showcase a new product, or recycling old spots for products that are unchanged.

There isn’t much the industry can do about the biggest reason production is heading north: a strong U.S. dollar relative to the Canadian currency, making it cheaper to operate in Canada.

But other factors play a role. In an open letter recently published in two trade publications, the Assn. of Independent Commercial Producers called on the industry to restructure the costly residual use fees for actors and tackle rising labor costs, among other things.

Of course, advertisers have always shot in exotic locales. “IBM films Tibetan monks in Tibet because it’s cool, not because it can pay Sherpas $5,” said Bryan Unger, associate Western executive director of the directors guild.

But producers say tight budgets increasingly force them to look outside the United States. Commercial shoots in Canada generally are not unionized, which means crews have more flexibility and advertisers don’t have to pay fringe benefits. And wherever there are nonunion shoots for actors, they can be paid a buyout--a one-time fee in place of costly residuals.

Akins estimates her clients will save 30% by going to Canada instead of shooting in Los Angeles, with a good chunk of the savings coming from lower fees for talent.

The Screen Actors Guild “should take a hard look at residuals use,” she said. “I think that’s the biggest part of the problem.”

“Residuals are a critical part of the revenue stream, particularly for commercials,” SAG spokeswoman Katherine Moore said.

As to whether the guild would look at residuals, officials said it would be inappropriate to comment on any aspect of the contract prior to negotiations. The guild’s contract with the American Assn. of Advertising Agencies and the Assn. of National Advertisers expires in the spring. Negotiations for a new three-year contract will begin early next year.

According to John McGuire, the SAG’s associate national executive director, it’s a violation of the current contract to produce commercials outside the U.S. using nonunion principal performers mainly for an economic advantage.

There are signs that commercial production is holding steady in Los Angeles. The Los Angeles Entertainment Industry Development Corp. says the number of outdoor commercial shoots grew 2.5% in the first half of 1999 over the same period in 1998. Cody Cluff, film commission president, estimates that overall commercial production--including indoor shoots--is growing 10% to 15% a year.

But the gains may be a mixed blessing for commercial producers. Cluff said some of that increase is driven by low-budget commercials for cable and satellite channels.

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Is L.A. Still a Shooting Star?

Though lower costs are luring TV commercial production to Canada, there are indications that local activity is up. Here is a tally of outdoor commercial film shoots in Los Angeles County, based on permits issued from January to June of each year:

First half of 1999: 3,548 permits

Source: Los Angeles Entertainment Industry Development Corp.