CTF cuts Canuck criteria for a more market-driven fund

With typical Canuck resilience, Canada's kids TV producers and broadcasters have gotten used to taking the almost-annual changes to production funding application guidelines in stride. But since the Canadian Television Fund (CTF) receives more applications than it can accommodate each year, setting project selection criteria has become an exercise in creativity for the fund's two judging bodies - private sector group CTF and Crown corporation Telefilm Canada.
March 1, 2003

With typical Canuck resilience, Canada’s kids TV producers and broadcasters have gotten used to taking the almost-annual changes to production funding application guidelines in stride. But since the Canadian Television Fund (CTF) receives more applications than it can accommodate each year, setting project selection criteria has become an exercise in creativity for the fund’s two judging bodies – private sector group CTF and Crown corporation Telefilm Canada.

And it’s a process that’s about to get trickier. The federal government’s recent decision to slice its annual contribution to the US$154-million,

public/private fund by 25% over each of the next two years means that CTF coffers will drop by 11%. That’s assuming that the CTF’s other two principal backers – the Canadian cable and satellite companies and Telefilm – maintain current contribution levels.

But even before the cuts, it wasn’t exactly easy for producers to get their hands on CTF money. In 2002, of the 161 kids productions that applied to one or both of the CTF’s two funding platforms – the license fee program (LFP) and the equity investment program (EIP), which are managed by the CTF and Telefilm – there was only enough money for 70% of the projects.

Hoping to reduce the number of submissions, the CTF tweaked the LFP guidelines yet again last year, removing the controversial Visibility of Canadian Elements criteria. Distributing US$87 million to productions annually, the CTF offers a non-recoupable subsidy of 13% to 35% of a project’s budget.

Under the old evaluation system (2000 to 2002), the CTF awarded productions points based on three categories: The amount the lead broadcaster paid in the form of a license fee above a minimum threshold, the level of which hinged on the size of the Canadian portion of the production’s budget; the visibility of Canadian elements in the project; and the size of the production company applicant. The CTF would kick in more points for a small- to medium-sized (SME) prodco, defined as a company that earns annual revenues of US$16 million or less. Productions could score a maximum of 50 points for the ‘license fee above threshold’ criteria, 25 points if it contained enough visibly Canadian elements, and five points if it was produced by an SME.

Unfortunately, many broadcasters were routinely maxing out on the license fee criteria by paying top fees, says Phil Serruya, CTF director of communications. Since most applicants were SMEs, it often meant that the crux of the CTF’s judgments rested on the non-scientific process of deciding whether or not a project contained enough – or the right kind of – visibly Canadian elements.

For 2003/2004, the CTF replaced the Canadian Elements criteria with Broadcaster Priorities. Issued last summer, the number of priorities assigned to each broadcast group was calculated based on its size, penetration in Canada, and past use of the fund. Under the new system, the groups assign a ranking to productions for which they’ve paid a license fee. Each ranking carries a set point value (between one and 20) that is added to points for the broadcast license fee (up to 50 points) and the size of the main producer (up to five points). Basically, the higher priority a broadcaster assigns a series, the better its chances of getting CTF funding.

Telefilm also removed the Canadian Elements from its EIP eligibility guidelines. Telefilm, which takes an equity position on productions and provides up to 40% of their total production costs, distributes roughly US$67 million through the fund annually. Producers typically apply to both programs, with the understanding that the Broadcaster Priority they garner for the LFP will factor into Telefilm’s evaluation grid. However, unlike the CTF, Telefilm relies on more subjective criteria – like originality and potential commercial viability – in assessing the fund-worthiness of projects.

February marked the 2003 LFP and EIP application deadlines for children’s and youth programming (with a second LFP round for kids shows in October), and the CTF won’t announce which productions have qualified until May. While many execs say it’s too early to predict the impact of the guidelines, producers and broadcasters universally welcome the changes.

‘It should give the industry more of a global focus in how we all – broadcasters, producers and funding agencies – view the market we’re working in, rather than having the CTF decide [a project's funding fate] on whether or not it’s Canadian enough,’ says Sandra Walmark, manager of original production at Family Channel. The new rules should also make Family’s co-productions run more smoothly, she adds, because the company won’t need to retrofit projects to meet Can-con criteria, a task that often proved difficult when working with foreign partners. Majority-owned by Astral Communications, Family Channel (which shares 10 spring priorities with sister nets The Movie Network and MoviePix), issued priorities to two CTF applicants in February, including Decode toon King.

Like Walmark, Mainframe CFO George Lawton believes that the removal of the Canadian Elements criteria should prove liberating for producers and will lead to more successful projects: ‘I’m assuming that broadcasters will prioritize shows according to their potential commercial viability,’ he says. ‘And that’s something we welcome – we want the funds to go to shows that are going to make money.’ It’s been two years since Mainframe last won CTF funding for a show (series four of Reboot), but at press time, Lawton was confident the company would apply to the CTF for two shows (Maxine 5 and Alien Legion) this year.

But it’s debatable whether the absence of the Canadian Elements clause will have an impact on content, since producers must still meet the guideline’s four essential Can-con requirements: That the project contain Canadian themes and subject matter; is mostly produced by Canadians; that its underlying rights are significantly owned and developed by Canadians; and that it’s set and shot in Canada.

In 1999, the CTF introduced exemptions for children’s and youth productions, allowing producers to set shows in a generic or fantasy setting – provided that it wasn’t identifiably foreign. As well, producers were free to incorporate foreign characters, as long as they were balanced by Canadian counterparts. So where content is concerned, are the CTF’s changes merely cosmetic? No, says Lawton, adding that with Canadian Elements, ‘there was always a tendency to put Canadian flags or emblems in certain places in a show, just to be on the safe side.’

Conversely, Corus head of programming Peter Moss isn’t convinced the changes will affect the type of shows producers submit to the CTF. He says Canadian Elements were never an issue for YTV shows because they were never really obvious, like including the CN Tower or some other landmark in a series. ‘But I don’t think that’s what stops shows from being sold internationally, anyways’ says Moss.

Others, like AAC Kids VP of programming and distribution Ken Faier, believe that as long as the essential requirements are in place, ‘you will continue to see it being a factor in deciding which projects get the funding.’

Who stands to benefit the most from the new guidelines? For now, neither broadcasters nor producers are claiming victory, but both have theories. While Lawton says the new guidelines will reward more creative projects, he notes that the CTF has placed two of the LFP’s most important criteria – the amount of the license fee and Broadcaster Priorities – in the hands of the broadcaster. Such a situation, he says, would benefit broadcast groups that also own production divisions when it comes time to assigning their Priorities. A competitor like Corus-owned Nelvana may have a potential advantage, he explains. Says Lawton: ‘What I’m concerned about is that an independent producer like Mainframe is not tied to any broadcaster. Some producers have had the foresight to sign output deals with certain broadcasters, and I wonder how that could impact us.’

But Corus’s Moss downplays any potential advantage, noting that it wouldn’t be cost-effective for Corus to assign all 20 of its spring Priorities to Nelvana shows. Nelvana, he argues, is not a small producer that needs one domestic sale in order to meet its financing. And its projects carry price tags in the US$130,000 to US$200,000 per half hour range, which would be onerous for a single domestic broadcaster to support on its own by continually paying maximum license fees.

Moss says the current CTF guidelines, which still place the greatest point weight (roughly two-thirds) on the amount broadcasters pay for shows, should continue to benefit producers by driving up license fees. YTV currently pays US$13,000 to US$54,000 per half hour for original commissioned programming, which represents a 30% increase from three years ago.

Though Moss concedes that indies without an output deal with a broadcaster may feel vulnerable under the new guidelines initially, such companies are likely to excel in the long run. ‘You have to have a big enough structure to warrant an output deal with a broadcaster. Carrying that kind of infrastructure is expensive, and in this market you might do much better if you’re lean, mean and able to staff up when you need to.’

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