Canuck buck ducks: foreign filmers cheer while locals jeer.
For many in the industry in the Great White North, notably anyone who has to pay for goods or services in U.S. dollars, the declining Canuck buck means escalating costs and lower profit margins.
On the other hand, the country's film commissioners are rubbing their hands with barely concealed glee in anticipation that the major film centers will likely post record years for foreign production as a result of the country's weak currency.
The Canadian dollar--known as the loonie by locals -- has been trading well below the U.S. dollar for several years. Buy it has fallen more than 7% since March, when it was valued at over 70 [cts.] U.S.
The loonie has hit more than 20 record lows over the past two months and closed at another record low of 65.9 [cts.] U.S. Aug. 5. The plummet is largely the result of the continuing economic crisis in Asia, which is pushing international cash into the U.S. money markets, and price decreases for Canadian commodities.
Most analysts don't believe the Canadian dollar will bounce back anytime soon, and it may be eroded even further by news last week that the Canadian economy is slowing down.
For Canadian film and television producers, the dollar's dip is a doubled-edged sword. Virtually all international sales are paid in U.S. dollars, so the loonie's precipitous descent boosts revenues from those sales. But producers also have to pay out a significant chunk of their expenses in American funds, which dampens the rosy results from international sales.
The currecy's roller-coaster ride makes it harder to ink deals as well, given hourly changes. "A fluctuating dollar is just kind of annoying. It changes things from day-to-day and it's harder to close deals. It really makes me feel kind of like we're in a banana republic," says Kevin Tierney, VP at Prods. La Fete, which shot Showtime's "Armistead Maupin's More Tales of the City."
Michael MacMillan, chairman and CEO of Atlantis Communications, is more sanguine about the dollar's slip.
The head of the Toronto-based TV production company -- which is merging with Alliance to create the country's top entertainment outfit -- said the impact of a low Canadian dollar is probably moderately positive for a company like Atlantis, thanks to its large volume of international sales paid in American dollars.
But MacMillan remains concerned about the long-term health of the Canadian currency.
"It makes it better to earn money in American dollars," says MacMillan. "But the lower the Canadian dollar goes and, if it stays there, you can expect more U.S. producers to come here and that only puts upwards pressure on the cost of goods and services here."
The rising cost of acquisitions is the reason the dollar's troubles are nothing but bad news for film distributors operating in Canada.
For any Canuck distrib releasing U.S. films, costs are up as a result of the loonie's dip without any similar increase in revenue. It shrinks the profit margins for the distribs, which will be less painful for larger players like Alliance Releasing, but is a tougher pill to swallow for smaller distributors.
"There's no upside," says one Canadian film distribution executive.
But the sinking Canadian buck is good news for American and other foreigners looking to produce in Canada. Montreal film commissioner Andre Lafond says his office has been inundated with calls from Hollywood producers keen to shoot films and TV projects in Montreal.
As it is, 1998 will be a record-breaking year for U.S. production in Montreal, with the foreign investment rising from C$130 million ($86 million) to C$270 million ($178 million). But the major upswing is only partly a result of the recent plunge of the dollar, according to Lafond.
"For me, it's a plus," says Lafond. "But, at the same time, they're already coming because of the exchange rate. (The recent dip) could increase the amount of production by 5% or 10%.
"But I'm concerned about the boomerang effect it might have on our own filmmaking. I also have to worry about our own film industry and it may create inflation in terms of paying for materials."
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|Title Annotation:||Canadian dollar slump and film production|
|Date:||Aug 10, 1998|
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