Source : Hollywood Reporter

TORONTO -- More evidence that Canadian independent producers are struggling was revealed recently when Statistics Canada pointed to an increasingly "tight profit squeeze."

The government statistics agency, in its annual survey of domestic film and video business, said revenue reached a record CAN$2.59 billion in 2001, the last year surveyed, up 10.5% from year-earlier levels.

But Statscan also indicated operating expenses in 2001 grew by 12.8% to CAN$2.55 billion, and that led the Canadian production community to end 2001 with a profit margin of 1.2%, down from a margin of 3.2% in 2000 and 4.7% in 1999, a high-water mark for the industry.

In recent years, Canadian film and TV producers have shrunk in number and ambition in response to falling demand for U.S.-style TV programming in Europe and elsewhere. On Dec. 10, Alliance Atlantis Communications, the country's largest independent producer, said it would gut its production business and focus instead on movie distribution and broadcasting to restore its profitability.

Looking back to 2001, Statscan said the industry suffered from "a weaker film market in the United States and the popularity of reality programming, particularly among major American broadcasters, at the expense of costlier productions such as movies."

Also undermining the bottom line of Canadian producers were higher debt loads and operating costs, not least from payments to subcontractors.

The survey also points to an increasingly poor business model for homegrown producers. As generous government subsidies and equity investment levels declined for Canadian producers, most film and TV programming created and made by them after 2000 increasingly did not cover production costs.

Statscan also pointed to the effects of industry consolidation and ambitious debt-driven growth strategies. The survey said the five largest film producers reported a combined 26.3% increase in revenue the1999-2001 period, compared with a 5.8% drop for all other producers.

That meant the top five players earned 48% of all production revenue in 2001, compared with 41% in 1999. At the same time, their profit margins mirrored those of other producers in 2001.

© Hollywood Reporter