CANADIAN SUBSIDIES HURT HOLLYWOOD, STUDY SAYS.

Byline: Greg Hernandez Staff Writer

Hollywood's claim that runaway production has eroded the U.S. film industry got support Wednesday from a study showing movie production in Canada has soared since that nation's government began offering tax subsidies in 1998.

Film budgets in Canada grew by a total of $610 million in the past three years while film budgets in the United States suffered a $560 million decline, according to the study by the Encino-based Center for Entertainment Industry Data and Research.

``While some may argue that the growth of Canadian production is not a startling revelation, the implications of the rate of growth are profound,'' said Mark A. Rosenthal, co-founder of the nonprofit CEIDR and president of Raleigh Enterprises. ``Even the patriotic surge following Sept. 11 has failed to abate the loss of production.''

The study, ``The Migration of Feature Film Production from the U.S. to Canada,'' found that the trend is most apparent in projects in the industry's critical $5 million to $50 million budget range, where there has been a 94 percent increase in Canada-based production in the past three years in contrast with a 35 percent reduction in the United States.

CEIDR co-founder Stephen Katz said the report's findings should serve as a ``wake-up call'' for those in the industry.

Katz, a 1979 Academy Award winner for the co-development of Dolby Stereo, said CEIDR is making its data available in order to better inform the entertainment industry in the fight against runaway production.

``It's hurting the workers like gaffers, grips, drivers and everyone that works in the production industry,'' Katz said. ``Canada is buying away our industry.''

Katz also authored the 1999 ``Motion Picture and Movie-of-the-Week Production Survey.''

He said that when when runaway production began occurring a decade ago, projects that filmed in Canada were in the budget range of $5 million to $10 million and were mostly movies of the week and television miniseries. Once the incentives came into place, the higher-budget pictures also went to Canada.

``The forecast is devastating because it's showing that what's happening with the average budget project is that they are just going to take advantage of the incentives offered by Canada,'' he said. ``There's more to save on something that costs $50 million than something that cost $5 million.''

Other report highlights:

--In 2000, overall film production in Canada increased by 106 percent, with 92 percent of the projects qualifying for the tax subsidies.

--The biggest growth in Canadian-based production was in films with budgets of more than $50 million, with movies in the $20 million to $50 million range also significantly increasing.

--The average movie budget in Canada increased from $18.7 million to $27.6 million, a 48 percent jump compared with a mere 1 percent rise in budgets for films shot in the United States.

--Of films in the $5 million to $50 million range, 31 percent of the independently financed and 39 percent of the studio-financed films shot in North America were in Canada. U.S. studio-financed productions in that range fell by 43 percent.

--Total estimated budgets for films shot in Canada increased by 149 percent from $410 million in 1999 to $1.02 billion last year.

--A production that shoots in Canada instead of the United States saves an average of 10 percent to 15 percent of the overall budget.

CEIDR's findings come at a time when the entertainment industry is looking hard at remedies to runaway production, which has not only grown in Canada but in countries such as Australia and Great Britain that also offer financial incentives to help producers more easily meet their budgets.

A preliminary investigation was launched this month by the federal government into Canada's film and television subsidies. The International Trade Commission issued more than 100 questionnaires to production companies and studios.

The federal probe is a result of a petition filed last week by the Screen Actors Guild, the Film & Television Action Committee and several Teamsters locals. The coalition is seeking to stop runaway production by imposing controversial countervailing tariffs on subsidized productions. The tariff proposal is strongly opposed by much of the industry establishment, including the Motion Picture Association of America and the Directors Guild of America.

There is more universal support for a wage-based tax bill introduced in the Senate this summer aimed at reducing runaway production by providing financial incentives to film and television producers who shoot within the borders of the United States.

CEIDR was formed with the goal of providing the U.S. production industry, elected officials and the public sector with data and research on the creation of entertainment product worldwide. The organization's primary goal is to inform the industry in order to help it market itself as a competitive production venue in an increasingly global economy.

``I hope the report will help examine these issues in the cold light of reality and say: This is what is happening to the business and what can we do to combat it?'' Rosenthal said. ``We in the U.S. still have, far and away, the best talent and production infrastructure in the world.

``What can we do to pull together to make the production in the U.S. more cost-effective?''