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B.C. film/TV production to fall below $1 billion this year
11/21/2002

Vancouver, - Film and TV production in British Columbia is expected to fall below $1 billion this year for the first time since 1999, sources in the industry predict.

The B.C. Film Commission reports the number of projects for the first nine months of 2001 was tracking slightly ahead of last year.

But a senior industry executive says spending is down sharply and a union leader says unemployment in some sectors is approaching 50 per cent.

"Our estimates are off by about 30 per cent this year as far as overall revenues," says Bob Scarabelli, chief executive of Rainmaker Income Fund and a director of the Motion Picture Producers of British Columbia.

Revenues from film and TV production topped $1.1 billion in 2001, the second-best year ever after reaching $1.2 billion in 2000. Spending broke the $1-billion mark in 1999, remarkable considering production in 1990 was worth only $188 million.

But the impact of last year's stock market crash and terrorist attacks have rippled through the U.S. entertainment industry, responsible for about three-quarters of the money spent here.

The film commission's own figures show that while feature-film production climbed over the last year, including blockbusters such as the X-Men sequel, the numbers of TV series and movies of the week have dropped.

Television is the mainstay of the Vancouver-based industry, the third largest film and TV centre in North America behind Los Angeles and New York.

Scarabelli, who runs the second-largest post-production company in Canada, says Rainmaker's revenues are down about 15 per cent.

"My peers across the industry are down 25 to 50 per cent, so I've averaged out to 30 and said that's where we're at," he says.

Industry revenues likely will not exceed $1 billion this year, he says, a view echoed by Tom Adair, executive direct of the B.C. Council of Film Unions.

"I wouldn't be surprised if our totals this year aren't what they were three years ago, which would have been $900 million," says Adair. "I don't think we're going to be close to $1 billion."

About 25,000 people work in the B.C. film and TV sectors. Adair says unemployment among some 12,000 unionized workers is about 50 per cent.

The sluggish economy has made U.S. studio executives very risk averse, says Robert Routh, senior analyst for New York-based Arnhold and S. Bleichroeder Inc. Return on investment, especially for movies, is poor, and capital markets have no patience for flops.

"The access to capital I think has been the biggest factor that is impacting film and television production everywhere," Routh says.

Rainmaker (TSX:RNK.UN) has reacted by laying off six people and not renewing contracts of four others, out of a workforce of 160, and has written down assets aggressively.

To maximize business, Scarabelli says the company is also pricing its services more attractively and marketing to new clientele, such as Asian commercial producers.

"We have and will continue to expand into more independent and local Canadian production and land some of those projects," Scarabelli adds.

For industry workers, most of them behind the camera, the choices are more limited.

Set builders might turn to jobs in the thriving construction industry, says Adair, but specialized trades such as lighting and set decoration are more vulnerable if there is a sustained downturn.

"If they have to start selling their stock and selling their equipment because they can't keep space all that infrastructure starts to collapse," he says.

"And the infrastructure and all that is what you need for servicing a larger number of productions."

If the slowdown continues much into 2003, Scarabelli warns there will be a shakeout. Larger companies will cut back services and smaller ones will consolidate or close.

"If you don't have the infrastructure to compete globally, then it really will start to deteriorate," he says.

There is a silver lining for Canadian projects that suddenly find companies anxious for their business, Adair agrees. But the budgets are minuscule, $2 million is considered lavish.

"That's a budget for one week of a big American series," Adair says.

Given the B.C. industry's hockey-stick growth curve, some levelling off was inevitable, says Scarabelli. Besides leaner economic times, competition for Hollywood dollars has increased from other offshore locales such as New Zealand and eastern Europe.

"So we have to be more competitive in order to keep at a plateau or any kind of growth level," he says.

The key is to add more services to encourage producers to leave more of their money here.

Despite the uncertainty, there seems little worry Hollywood Northwest will dry up and blow away. Adair says the industry has proven itself adaptable to changing trends.

In a business that treasures labour peace, the unions have negotiated -- though not yet ratified -- new three-year agreements with no wage increases in the first year, he says.

U.S. producers still prize Vancouver's seasoned crews and an extensive education network, including film and animation schools, ensure a stream of new graduates.

"When you have enough of the talent the money tends to come where the talent is," says Adair.

While Ottawa has canned some tax incentives that lured foreign productions, remaining tax breaks and 65-cent dollars continue to make Canada attractive, says Routh.



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