A COMMENTER ON the post below, where Paul Gross outlines the potential downside to the rush-to-gold Canadian-American deal to get your show financed, asked the following:
i'm confused about Gross's comment, 'what if it isn't successful?'
doesn't that just mean the show will crash and burn? but how would that be different if there was no US network involved? that is, if the show was made w/o US involvement, and strictly with Cdn $ and wasn't successful, wouldn't it still crash and burn? am i missing something?
Yeah, but it's more than a fair question. Thanks for asking it.
Because there is no "studio system" in Canada like there is in the USA, programs are much harder to finance, even with money coming from programs like the CTF.
In the USA, a studio puts up most of the money, with a license fee from the Network not quite covering the cost of making the show. (You can find figures on all this elsewhere.) The Studio is betting that the show will be a hit, and will run for years and then they'll make big cake.
In Canada, independent production companies have to raise the cost of doing the shows themselves. They generally do this by getting a license fee from the networks, which don't even come close to covering the cost. Say it's around 30%. Then they get the CTF money. That CTF money can get you pretty close to your budget nut, say 70% or 80%. But it's that last 20 to 30 percent that's the hardest to raise. You can raise some of it by taking advantage of tax credits -- but tax credits don't come until the end, so you have to get a bank loan to float the cost in the meantime -- which has become a lot harder with the credit tightening of the last year following the Wall Street collapse. You can raise it through private investment, your own investment (most producers don't do this) or you can pre-sell a few of the foreign territories. That's dicey, because it's cutting into your revenue stream for the future just to get the show made. But what are you going to do?
Gross' point is that when you're making up that structure, and you take the U.S. money from a CBS or an NBC, you're handing over a lot of power for not a lot of investment. It's a great deal for them -- they get a cheap product. But they care about the product probably commeasurate to what they put into it. And like it or not, you're getting a partner who will demand a lot for that investment. They'll want to be able to influence the creative -- even when everybody agrees that they won't, they do. They will probably downplay how much, since the CTF is, in effect, public money. But don't kid yourself.
Now if you gamble right and use the money well, it can payoff. That investment in Flashpoint allowed the show to shoot on 35 MM, which looks gorgeous, and go with all those helicopter shots of Toronto. It looks big. Good gamble.
But it's not always a good gamble. And then you're locked into a look, or a budget level, that you'll never be able to make the show at again. So if the U.S. partner pulls out, you're effectively dead.
When you're putting a show together, there's all sorts of ways you could go. It's possible that in making that last 10 or 20% of the show's budget, if you don't take the U.S. budget and inflate everything, you retain more in creative control, and can craft a show that might be able to sell overseas and in other territories, and you may even be able to finance it that way for a few seasons and hit your syndication number, so that you can make money on the show.
Nobody who only puts 10% into your budget should have the power to wield the gun to your head that can kill the show. But effectively, that "U.S. network carrot," is universally seen to be such an important thing right now, that it hands the keys to the minority investor. To the U.S. network, it's a small risk. To the Canadian producer/production company, it's everything. There's a big imbalance there.
If your budget level was 1.2 million an ep, say, that you could raise. But if that U.S. investment means you're now going to be spending 1.8 or 1.9 million an ep, then that money's gone, well, now you've got a whole bunch of creative decisions predicated on that budget level. You might be able to trim a couple of hundred thousand off and still maintain a look or a feel of the show that allows you to continue. It could be difficult, but you could do it. The U.S. investment, and the creative choices that go with it, would probably make that impossible. You're putting all your eggs in that basket. To you, it's everything. It's your eggs. But to them, they have a whole lot of other crap they're gonna pile in that cart. They could crush your eggs and never even notice.
Now, it's quite possible -- since the last part of the financing is the hardest piece to put together -- that you wouldn't have made that last 10% or 20% without the U.S. investment. In which case, you're right, losing the U.S. investment just puts you where you would have been anyway. But if you could have made the show another way, and sold, say, to a U.S. network or cable channel afterward, then you might have just traded 13 episodes for what could have been 39, or 60, or 80.
That's what Gross was talking about.
9 comments:
Speaking of which, is that what Paul Gross went through with Due South back in the day, after CBS dropped it?
"But it's that last 20 to 30 percent that's the hardest to raise. You can raise some of it by taking advantage of tax credits --"
I have to remind readers the tax credits became a piece of the financing pie because of too-little capital and financing. The TC's were meant to help producers grow their businesses and develop projects. Instead, buyers eyed that money and it has become, all to often, part of the production budget. No small wonder producers look for other financing sources (U.S. networks and studios) regardless of the risks and consequences. They're always in need of that last pieace of the budget.
Mac, yes, you make a good point. And it is ever thus with any scheme they seem to introduce here.
Talk to crews working in White Rock, B.C. or Hamilton, On instead of Vancouver and Toronto.
An extra tax credit bump meant to be an incentive to do some shooting outside of major centres has become a defacto "must use" part of many budgets. The result is tired crews having to drive an hour to work and at least a few accidents caused by fatigue. The intent was pure, the execution was not.
Every one of these schemes, by the way, has been accompanied by a reduction of the license fee for the network. Canada pays the lowest percentage of the budget for homegrown shows as any network in any country. Used to be up to 45 % of the budget. Now you're lucky if it's close to 30%. Fits in perfectly with the mandate of not really wanting your homegrown stuff to do too well, no?
By the bye, save local tv.
My impression was Paul Gross was talking about the way US networks cancel shows in mid run. Canadian networks almost never do that. So if you've sold THE BRIDGE to CBS, and CBS is the financing that fills the gap, what do you do if they cancel at ep. 6? How do you finish your 13 episodes? You're hosed. And everyone knows your show was canceled in the US, so it's hard to sell it elsewhere and make up the difference.
Yes, that's part of it. The rest is what I wrote above.
Alex said, "And everyone knows your show was canceled in the US, so it's hard to sell it elsewhere and make up the difference."
And he's right. I wonder, though, coming at this from the book world as I do, where when we go to sell foreign rights the first question we're asked is, "Who's publishing it in the US?" We don't like that question, of course, but having the "right" answer sure moves the conversation along.
So again, although CBS only comes in with a small percentage of the budget, it can be used, as was said here, to get the whole budget and it can also be used to get some foreign sales.
The double edge on that, of course, is that all the good that can come from the US sale can be taken away after only a couple of episodes. So, it's a big risk, but that's the nature of the business, isn't it?
Take the money side out and you'll begin to understand why Flashpoint people call CBS "Big Brother." Content is the word. What the show is about can change dramatically with that little bump in the budget. Is it worth it? Guess there are valid arguments on both sides. But my two cents is one has a better chance of actually making the show they set out to make when there are fewer chefs in the kitchen.
Thanks for this Denis...I'm always trying to explain the nightmare of that final 15-20% and why it's so hard to raise in Canada - you summarized it nicely.
thanks so much for the clear, concise explanation(s) -- i have a better grasp.
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