Radio / Television News

COMMENTARY: It’s not clear what a Canadian producer is – but it needs to be

By Douglas Barrett

AMID THE GATHERING storm of comment on what should constitute a Canadian program once Bill C-11, the Online Streaming Act, is passed, there’s a question that needs to be addressed at the forefront: what is a Canadian producer?

Generally, when we think of a film or television producer we are speaking about the person or persons who have developed the creative property, raised the financing, engaged the key creatives including and especially the writer(s) and director, cast the performers, ensured the production stayed on time and budget, managed all aspects of post-production, and delivered the completed product to the distributors and broadcasters who have signed up for it.

Sometimes producers work on their own, sometimes they operate within a corporate entity, sometimes they are engaged on a freelance basis by contract. And sometimes they are affiliated with a broadcaster. Within the Hollywood studio system, they are usually working on a work-made-for-hire basis.

In the Canadian context with its network of subsidies, the top-line requirement is always that the producer (or co-producer in the case of a treaty co-production) be Canadian. A Canadian is a citizen or permanent resident during the time of production.

What’s interesting is that the CRTC and the Canadian Audio-Visual Certification Office (CAVCO) each take a remarkably different view of what a producer is, and that’s relevant because only a CAVCO certification delivers access to the Canadian Content Tax Credit and its provincial counterparts.

The CAVCO rules generally track the description of the role set out above. It establishes a five-part test:

  1. Development: The Canadian producer must have and maintain full control over the development of the project from the time at which the producer has secured underlying rights.
  2. Creative and Financial Control: The Canadian producer must have and maintain full responsibility and control over all creative aspects of the project, and expenditures related to the production of the project.
  3. Production Financing: The Canadian producer must have and maintain full responsibility and control over all aspects of production financing.
  4. Copyright: The Canadian producer must have and maintain full responsibility and control over the negotiation of initial exploitation agreements (and therefore must be the first owner of copyright).
  5. Revenue Share: The Canadian producer is entitled to a reasonable and demonstrable monetary participation in terms of budgeted fees and overhead, and participation in revenues of exploitation and must retain at least 25% of the net profits from the exploitation of the production in non-Canadian markets.

Now, of course there are pages of clarification of these five rules, all designed to prevent various kinds of end-runs around the key principles. Here’s a for-example:

“Documentation must demonstrate that the producer has exercised full control (direct or indirect) and holds final decision-making authority over the financing plan of the project; the securing of all third-party financing including domestic and foreign equity, domestic and foreign subsidies, domestic and foreign pre-sales and the negotiation of the terms thereof; the securing of interim financing and the negotiation of the terms thereof; the cash-flow schedule of the project; and the management of the banking of the project and sole and unfettered control over the bank account(s) of the project and cheque-signing authority.”

You get the picture. Across the street though at the CRTC, the rules are considerably simpler. Here are the two key sentences:

  1. The producer … “Must be Canadian, must control and be the central decision-maker of a production from beginning to end.”
  2. “The producer must be a Canadian and must act as the central decision-maker from the development stage until the production is ready for commercial exploitation.”

Consider the first requirement. What does “from beginning to end” mean? There is no clarity in the rules about the “beginning”. In the second requirement the expression is “from the development stage”. Does that mean after the development stage or including the development stage? Then it says “until the production is ready …”.

I would argue that taking these phrases together, the only obligation is that that Canadian producer control the physical production and post-production process. There is no requirement for the producer to own copyright or distribution rights, and no requirement for any kind of a revenue share. On the production financing side, the rules explicitly permit a non-Canadian to function as executive producer for “arranging financing and foreign distribution.”

So where does this leave us? The CRTC producer definition matches that of CAVCO in respect of creative and financial control over the production but is conspicuously silent on the remaining four tests.

You might argue that this should not matter since the CAVCO certification is needed to gain access to the Canadian content tax credit defined under the Income Tax Act. CRTC certification does not give such access.

But once the Online Steaming Act is passed, the CRTC will be asked to revisit the definition of Canadian content and will have to decide what production obligations are to be imposed on the streamers. It’s well known that the business model of Netflix, Amazon Prime and Disney+ relies on owning global rights.

Under the current CRTC rules, it seems perfectly feasible for a streamer to make and entirely own a Canadian content production through a trusted Canadian producer. And as a bonus, the production would have access to the Production Services Tax Credit which though not as generous as the Canadian content credit remains attractive enough to drive a pile of production to Canada.

But that may not be enough for the big streamers. Recently representatives of Disney appeared before a Senate committee and proposed that there be “more flexibility” around Canadian content requirements so that films such as Turning Red an animated film set in Toronto, (but made by Pixar) with Sandra Oh in the cast would be treated as Canadian.

From Disney’s view it would seem, simply telling a Canadian story (even if from an American viewpoint) should guarantee full access to all the Canadian content subsidies and benefits. Commentators have described as an “anomaly” the fact that some productions not set in Canada have qualified as Canadian “just because the intellectual property is owned by a Canadian company”. One suggested that the system is “geared towards Canadian ownership”.

This isn’t true, of course. The CAVCO rules plainly focus on effective Canadian producer control of the programming, the participation of Canadian creators and the spend on Canadian services. One important component of this package is intellectual property ownership and revenue sharing. If you own it, you run it. That’s a pretty simple proposition, one which the streamers well understand. Why doesn’t the CRTC system reflect this reality?

It’s probably because CRTC certification was designed decades ago in much simpler times to service the needs of Canadian broadcasters. It was never meant as a handmaiden for the introduction of American streamer owned programming into the Canadian broadcasting system.

In my view, now is the time for it to be gently ushered to the sidelines.

Next: The weird efficacy of the Canadian content points system.

Douglas Barrett is an adjunct professor in the Schulich School of Business. He was chair of the board of directors of the Canadian Television Fund from 2004 to 2008.