Runaway Q & A;/dt1st/mark2nd

Alan King is president of the Director’s Guild of Canada. He has worked on various U.S. television productions (“Alfred Hitchcock Presents,” “Kung Fu”) as well as many Canadian films and TV projects. He spoke from Toronto.

Question: What do you think of the runaway production issue?

Answer: We refer to it as “international production.” I’m sure no one would want to run away from Los Angeles.

Q: Why was it necessary to have PriceWaterhouseCoopers study the issue?

A: I guess we’re responding to the “misconceived” is the most polite way to put it interpretation of what commonly happens with film commissions. Take a $60 million film. Between 20 and 25 percent of that is studio overhead. (For a U.S. film made in Canada), the stars’ salaries aren’t paid here. The development costs, post production, scoring, all of that is paid in L.A., not in Toronto or Vancouver or Sydney.

Q: You aren’t disputing that more and more U.S. productions are being shot in Canada. To what do you attribute this trend?

A: There has been a realignment of the television networks, and as the market becomes more fragmented, the money has become more fragmented as well. You now need new channels for money. Those are shifts, but in truth, production is still very high in Los Angeles.

Q: What are some of the misperceptions about how a U.S. movie or television program is made in Canada?

A: Many of the productions shot here wouldn’t occur without Canadian involvement. CBS’s “Due South,” for example, originated in Canada, was developed here and pitched to CBS. Then, pre-sales and pre-investments are a large part of the business these days. If I want to make a series, I can sell it in Britain as a finished product for license. But if I pre-sell it, the partner gets a greater investment, and may also feel as if they get some control of the product. There would have been no “Kung Fu” without (Canadian company) Global Television putting up the initial investment.

Q: So U.S. production companies are depending more on non-U.S. funding?

A: The appetite for productions is so high that you need that kind of (foreign) financing. If you are going to sell your product around the world, you need that part of the business around the world as well. (Foreign financing) has risen substantially, and I think it’s right and proper. It doesn’t take work away from anyone.

Q: What about claims that Americans are losing jobs to Canadians?

A: Well, it’s much more difficult for a Canadian director to work in Los Angeles than it is for a U.S. director to work in Canada. We need a special work permit to work in the U.S., while we don’t ask any of that at all (for a U.S. director). A great deal of work is provided here now that would not exist otherwise. Simply put, production wouldn’t occur at all. It’s not nearly the one-way street it appears.

Q: Some of the controversy arises from what are perceived as unfair tax credits offered by Canada for U.S. film production done there.

A: Curiously enough, the impetus was to put Canadian money into Canadian productions, so a national tax credit was introduced. Then different provinces offered credits of their own, to lure production from Toronto, which is seen here much like New York or Los Angeles is seen in the States. But I was talking to a U.S. producer the other day, and he said tax credits weren’t a make-or-break issue for coming here.

Q: Why do you think so much is being made of production fleeing to Canada?

A: Because it’s visible. Because there is work coming here from Los Angeles. But, you know, the rest of the world thinks the U.S. is quite parochial. Less than 3 percent of the material shown on television and theatrical productions (in the U.S.) is foreign-made, while less than 1 percent of the material in theaters (in TV there is more Canadian content) in English-speaking Canada is Canadian.

People are looking around for someone to get angry with. Don’t blame Canada. These things tend to go in trends, anyway. We always like free trade as long as it’s going my way, not yours.

John Brinsley

Bryan Unger is the associate Western executive director for the Director’s Guild of America.

Question: What’s the difference between the clamor being raised about runaway production now and that in the 1980s, when everyone was up in arms about production moving to other states?

Answer: When production was moving to Florida, they were still hiring Americans. Spreading work around to the rest of the U.S. isn’t objectionable. When you take production to Canada, they are stopping people at the border. You can’t take them in with you. When moving to a different state, you’re still capturing U.S. income.

Q: How do you explain the discrepancy between your report, which implies that in 1998 $2.3 billion in direct production expenditures was lost to runaway productions in Canada, and the Canadian response that they only realized $573 million from U.S. production shooting?

A: This is a classic case of comparing apples to oranges. The Canadian report doesn’t include productions that never filed for tax credits, and a significant number didn’t apply. It didn’t include partial production, something that was filmed for three weeks in Canada, three weeks in France and three weeks in the U.S. The Canadians count certain productions as Canadian. A significant amount of that production is only Canadian because a shell company has been set up as a corporation to get tax credits.

Q: But the assertion that some companies didn’t apply for tax credits weakens your argument that legislative redress is needed here to combat tax incentives in Canada, doesn’t it?

A: We’ve always said that the tax incentives Canada offers aren’t the only reason (U.S. productions) are there. The foreign exchange rate was always a factor, and lower labor costs. But the advent of the tax credits made it a no-brainer for a producer (to film in Canada). And the tax credits that are labor-based are relatively new. I think you’ll see that the number of people now filing tax credits will go way up.

Q: And legislation is the only way to keep the U.S. competitive?

A: The reason why we need federal legislation is that we are dealing with a global business. We could argue to countries that if you subsidize your film industry, we won’t let you into the U.S., but that isn’t the right tack to take. There are cultural issues involved. We believe in cultural diversity; we don’t want to impose trade barriers. But (foreign governments) are subsidizing 20 to 30 percent of the labor costs. It’s not a level playing field.

Q: And Canada is playing it unfairly?

A: The mistake that the press is making is to point solely at Canada. We’re using Canada as illustration, we’re not trying to demonize them. This is a global competitiveness issue. It’s not about bashing Canadians.

Q: There is, of course, the matter of studios cutting costs in production while spending lavishly on actor, director and executive salaries.

A: Well, the star is going to be paid the same no matter where the movie is made. The question is, do we want to have a middle class in L.A., with craftsmen and workers, or do we want an L.A. of only haves and have nots? What we see as a trend is a global awareness that (foreign countries) can capture this work coupled with the fact that $100 million productions have proven not to be lucrative as they might have been. So 20 percent less money spent on movies means 20 percent fewer carpenters.