Film financing: R&D rebate is a hit with producers

Ontario readying new program that lets industry recoup pre-production expenses.

Film and television production might be a world unto itself, but like any business, its success — or, for that matter, solvency — is a factor of cash flow and product cycles. Just as a pharmaceutical company or a toy maker has to research and develop products before they manufacture them, film and TV producers have to find projects and fine-tune screenplays before committing the exponentially larger sums required to shoot them.

Which is why film and TV producers in Ontario are in a state of giddy anticipation: the Ontario Media Development Corp. will shortly launch a development rebate that will return a percentage of a production company’s R&D outlay. Details and the launch date remain sketchy, but the Liberal government’s intentions are not: a line item in the March 2009 budget, the $10-million pilot program will ‘refund a portion of the costs associated with intellectual property development to Ontario-based companies in the screen-based industries.’ It will be the first rebate of its kind in Canada.

‘It means an enormous amount to us as a company,’ says Christina Jennings, the CEO of Toronto-based production house Shaftesbury Films, makers of the hit TV show The Listener. She estimates her company spends between $600,000 and $1 million developing projects each year. ‘If you don’t have a great property, you have nothing.’

As in most G20 nations, Canada’s film and TV sector relies on government investment and stimulus — through such vehicles as Telefilm Canada, federal and provincial tax credits and levies on private media such as the Canadian Television Fund. Most of that investment is directed at the production side. In 2008, 200 Canadian film and TV productions spent $544.6 million shooting in Ontario. The province returned approximately 25% of that sum to producers through the Ontario Film and Television Tax Credit, an estimated $135 million.

But the process of taking ideas to the stage where investors are willing to finance their production for a screen — be it cinema or rec room or hand-held — has received little attention. Or financial support.

Hiring a screenwriter is but one step. Producers must often spend large sums optioning the rights to books, plays or magazine articles. There can be travel costs if the writer needs to research. The rebate will also be open to video-game developers and other interactive media.

The OMDC declined to provide specifics until the rebate’s official unveiling, expected in early December. However, CEO Karen Thorne-Stone and director of tax credits Jennifer Blitz spilled some of the beans. The fund is not a tax credit but a rebate that will allow content creators to expend more energy getting material ready for production. It will not be jury-based — meaning that there will not be another level of cultural arbiters picking and choosing among ‘worthy’ projects.

As to the worthiness of film and TV in Ontario, Thorne-Stone has no doubt. She estimates Ontario sees an ROI of $10 to $12 for every $1 in tax-credit redemption.