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It's given us back bacon, Neil Young, Moosehead beer and Captain Kirk. But it's taking away our commercial production industry.

After a sharp rise last year, commercial filming in Los Angeles has dropped off in 1998. Some say the reason is that advertisers are cutting down their production budgets, and that's undoubtedly part of the explanation. But many commercial producers say they're doing just as much filming this year as last they're just not doing it in L.A.

Instead, they're going to Canada. Specifically, Vancouver.

"Vancouver is nutso busy," said Mark Thomas, executive producer with Santa Monica-based commercial production company Area 51 Films. "It's a nice town, the crews are good, the equipment is the same as what we've got here. Everything is just cheaper."

In fact, it's quite a bit cheaper, which is why many advertising agencies are demanding that producers film their commercials in Canada rather than Los Angeles or another U.S. location. A single U.S. dollar is currently worth about $1.50 Canadian and crews in Canada typically charge about the same amount of Canadian dollars for a shoot as they'd charge in U.S. dollars for an American shoot.

Thus, a crew member who costs $300 a day in the United States effectively costs just $200 a day in Canada.

In addition, the Canadian government is providing big tax credits for employers even American ones that employ Canadian citizens. So production companies are saving a bundle on taxes, particularly when compared to the high business taxes charged in the city of Los Angeles.

In 1997, there were 6,654 commercial film days in L.A. County, an increase of nearly 18 percent over 1996, according to the Entertainment Industry Development Corp. Each film day represents a day of location filming on a commercial shoot; sound-stage work doesn't require permits and is not counted.

Through August of this year, however, commercial film days were down 8.5 percent from the same period in 1997. And while the September figures won't be out for another week or two, EIDC President Cody Cluff said he expects the numbers to show an even deeper dip last month.

"Yes, we worry about it," Cluff said.

A decline in commercial production doesn't have the same impact as a decline in feature film or television productions, which tend to have larger budgets. Still, the EIDC estimates that each commercial film day pumps about $50,000 into the local economy, which accounts for crew, equipment and other costs.

Feature film and television production are both running behind last year, too, and the EIDC estimates each film day for these productions to be worth about $100,000. Through August, feature film days were down 2.3 percent and TV days were down 7.4 percent.

The flight to Canada is not the sole explanation for the downturn in commercial filming. Given the ongoing Asian contagion, Japanese advertisers are no longer coming to Los Angeles to film their commercials, as they did last year, Cluff said.

Further, Thomas and other commercial producers say the jittery financial markets are causing advertisers to look twice at their production budgets. The analysts who estimate yearly advertising expenditures are still predicting a slight increase in spending this year over 1997, but producers agree that money is being spent on media, not production.

Many advertisers are simply recycling old commercials, or cutting film budgets to the quick.

"Everybody seems to be riding this crest of, 'How can we cut production costs?' " said Herb Schwartz, president of Shadowrock Productions in Beverly Hills. "I will never understand why they want to pinch pennies on production when they could drop a market or two (avoid buying media in certain cities or regions) and do things right."

But Schwartz answers his own question: Because advertisers can get away with it. There is a big oversupply of commercial directors, many hungry for jobs, who are willing to charge cut-rate fees to get a great creative spot on their reels.

"I think the production community has definitely acquiesced to this entire formula," Schwartz said.

Even the General Motors Corp. strike has sent ripples through L.A.'s production industry. Producers agree that things were particularly slow while the strike was going on, and Thomas believes it's partially because the nation's biggest advertiser wasn't making any new commercials during the impasse. While GM's advertising agencies are in Detroit, the people who produce its commercials are, for the most part, in L.A., the center of the commercial production business.

While Vancouver might be riding high today, it's unlikely to remain a production center forever. Ad agencies are very opportunistic, and look to cut costs by going to whichever location is currently the cheapest.

"They're looking around as opportunities avail themselves," said Michael Deane, executive producer with Santa Monica-based Fuse. "This year, the Canadian dollar is fairly weak, so people are looking up there. Next year it might be somewhere else."

News Editor Dan Turner writes a weekly column on marketing for the Los Angeles Business Journal.

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