Insight Films CEO Kirk Shaw warns the Vancouver film industry faces impending collapse thanks to the rising Canadian dollar. His solution? An industry discount.
Michael McCarthy
Vancouver Courier
The view from Kirk Shaw's office on West Sixth Avenue in Fairview is modest, as befits its occupant. The CEO of Insight Films, Canada's foremost film production studio, may be the most talented person in the country you've never heard of. The books spread out on Shaw's desk paint a much prettier picture. Canada's biggest and fastest growing independent television and film production studio, and one of the largest producers of film and television movies in North America, grossed over $170 million in production revenue last year, mainly by making TV documentaries and movies of the week. Shaw has now launched into producing major Hollywood features with stars like Sharon Stone and Kim Basinger. The future looks bright, but the worried look on Shaw's face tells a different story.
The glory days of Hollywood North are numbered, claims Shaw, if people in the film industry and federal government don't wake up and take in the big picture. Canada's booming film industry is reflective of our country's overall economy vis a vis its major trading partner, the United States. The U.S. economy is heading south at the same speed as the economy in the Great White North is surging in the opposite direction. The immediate impact of this economic disparity is reflected in the official currency exchange rate, which sees the Canuck buck hovering at a giddy 95 cents U.S. with some pundits whispering about dollar parity by the fall. That scenario, says Shaw, will kill the Canadian film industry faster than Arnold Schwarzenegger knocks off bad guys.
"Maybe I am a lone voice crying in the wilderness," says the quiet Shaw, whose soft-spoken and modest demeanor disguises a razor-sharp mind with a profound understanding of film financing. "I love this business, I love seeing 'A list' actors in our restaurants and hearing who is in town. The film and television industry makes Vancouver a global city mentioned in the same breath as L.A., New York or Paris. Many others in the industry are afraid to speak about the potential damage and prefer to wait until the exodus has begun before deciding to act. Unfortunately, by then it may be too late."
There are many reasons why Shaw is not a household name like a Spielberg, one of which is that Insight Films has not been producing movies for very long. The 51-year-old film producer started out life as a journalist, writing as a teenager for the Richmond Review. He played junior hockey, but when the NHL scouts didn't come calling, Shaw dropped his goal stick for the pen, studying journalism at Douglas College. After a short stint as a concert promoter, he became a member of the key management team assembled to launch the Edmonton Sun newspaper. At the dawn of the cyber age, Shaw moved from print to computers, leading the sales team at CompuServe, one of the largest computer software distributors in Western Canada, and making a lot of money.
"In one way or another, my life has always combined media with business. As a child I still remember my favourite game was Stockticker," says Shaw. "I just seemed to love business."
In 1990, Shaw's entrepreneurial skills led him to found Insight, a company originally designed to produce museum and art gallery audio tours. Insight soon gained large clients like the Canadian Museum of Civilization, the La Brea Tar Pits travelling exhibit and the Smithsonian Institute. Years ahead of the curve, Insight provided these services on Sony Walkmans, with tours offered in several languages. Shaw then tried his hand at writing, acting and screenwriting, but found out that his real talent lay in production. In 1993 Shaw won a prize to produce a short film, and everything changed.
"Winning the National Screen Institute's National Drama Prize was the single most significant turning point in my life," says Shaw. "This experience exposed me to the inner workings of the industry. From the first taste, I relished the unique symbiosis of creative and business elements that permeate this industry. I knew I had found my natural home."
Understanding film financing--knowing where and how to get the money--is what has led to Insight's enormous success. Over the past five years, Shaw has perfected a successful production formula that combines owning its own infrastructure, a keen understanding of Canadian tax credits, and using high definition technology to streamline his company's costs. Insight never rents someone else's equipment or expertise. It employs its own crews and owns all its own equipment, a fleet of vehicles, cameras, lights, mobile dressing rooms and soundstages. Over 100 full-time professionals support 300 permanently contracted production experts. Insight now boasts several locations in the Lower Mainland including 30,000 square feet of production and corporate office space, 60,000 square feet of high definition sound stages and 8,000 square feet of post production facilities.
The key to Shaw's initial success with Insight was its low cost/high volume formula. In the last five years, Shaw has produced over 80 movies of the week, eight theatrical features, four dramatic series and five documentary series. In 2006 alone Shaw financed, produced and delivered 28 television movies, five theatrical features, two dramatic television series, a reality TV series and a documentary series. Titles through the years include series like Young Blades and Secret Files of the Inquisition, television movies such as Stranger in My Bed and Brotherhood IV: The Complex, and the recent reality show The Two Coreys.
Insight is now moving into the risky territory of feature films. Already produced is Battle in Seattle with Charlize Theron, While She was Out with Kim Basinger and Blonde and Blonder with Pamela Anderson. Torture, starring Laurence Fishburne, is next up.
"It's a real risk moving into feature films," admits Shaw, "and the only reason we are doing it is because I have finally figured out the financing. To be successful in features we need to keep our costs down."
It's this recent move into feature films that has Shaw concerned about the Canadian dollar. He thinks that many people have forgotten the main reason why Hollywood film producers decided to give B.C. a chance back in the first place. It wasn't the wonderfully talented crews sitting around waiting for work to arrive, although they may be doing that soon. It wasn't the lovely lighting or beautiful landscapes. It was the cheap Canadian dollar, languishing at 62 cents and looking for rich friends.
Why has the Canadian dollar soared in the past few months versus the mighty U.S. greenback? "I think it's a deliberate policy of the Bush administration," says Shaw, "and there is also the question of financing the current war in Iraq. I don't know what the war is costing, but I do wonder how they are paying for it. It doesn't really matter. Anyway you look at, with the Canadian dollar now at 94 cents, Canada has lost a huge competitive advantage. If you ask the banks, they might tell you that the U.S. dollar could slide even further. If that's the case, then the Canadian film industry will be in deep trouble."
John Genzel, manager of media and entertainment accounts at the Royal Bank, handles the Insight Film account. He explains that it is impossible to predict where the Canadian dollar will go, or why the U.S. dollar is fading, but the Canadian economy is very strong and will likely remain so.
"Last year the Royal Bank predicted that the Canadian dollar might go to par with the U.S. Now we don't know where it will go. It could slide back to 89 cents," says Genzel, who has high praise for Shaw's ability as a financially successful film and television producer. "The Bank of Canada has been very conservative and not raised interest rates. The Asian economy is very strong. We can't tell where the U.S. economy is headed, and we don't know where the Canadian dollar will go either."
A recent report of the RBC CASH (Consumer Attitudes and Spending by Household) Index found that American consumers are pessimistic about the future of the U.S. economy, job losses and job security. Whether or not the Canadian dollar goes to par with the U.S., Shaw claims that serious damage has already been done to the Vancouver film industry, but fallout likely won't show until late fall, by which time it will be too late to do anything. The time to act, he says, is now.
"Fox [a major U.S. studio] booked up most of the studio space in town until the end of the year in order to guarantee their costs, but they aren't doing any production work," explains Shaw. "When those contracts expire at the end of the year, there are going to be a lot of unemployed film people in Vancouver. Canada has grown into a dominant force in the global film industry, and in the past two months that's all been erased."
Since an increase of 10 per cent on the dollar in a production can mean the difference between profit and loss, Shaw explains that film producers need to know well in advance what it is going to cost them in terms of booking studio space, hiring crews and securing investment. Shaw has come up with a proposal to address the issue of guaranteeing costs, but he says that no one is listening. So far.
"I think local unions, suppliers and producers have to commit to a stable dollar, and what I am proposing is that we peg it at 88 cents so we can all plan ahead," he says. "Insight Films is willing to pick up all costs above and beyond that. If you do some research, you'll find that the states of Connecticut, Louisiana and New Mexico are going all out to lure Hollywood productions. They are offering new tax credits and building stages. Connecticut already has nine feature films in production. If Canada doesn't offer a better deal on the dollar, we are going to lose a lot more productions down south."
Shaw doesn't think the Canadian government (i.e. the taxpayer) should increase its tax incentives. He thinks this time it's the film industry that needs to bend. He has put forth the proposal for an 88-cent dollar in an informal fashion to the local industry, but so far the response has been tepid. Several small suppliers have contacted him, but the folks that provide food and drink to the industry aren't going to make any decisions that matter. The biggest factor in any such agreement would have to come from the film unions, and that seems highly unlikely.
"We are concerned about the future of the Canadian dollar and its impact on the film industry, but only in the long term," says Rob Morton, treasurer of the Union of B.C. Performers, an independent branch of ACTRA, and a negotiator for B.C.'s 5,100 film union members during recent contract talks. "I think we'll have a better idea of the future of the dollar by late fall. As for Kirk's proposal, our union just ratified a master production agreement on June 1, and I don't see re-opening talks as something the membership will look at now."
As for studios booking space and letting it sit idle, Morton says it's not unusual for studios to book space and let it sit empty for awhile. Costs in the industry are high; a principal actor on a B.C. film production will earn $580.58 daily under the new contract, a stunt person $867.55, but it's the prospect of productions moving to the U.S. to take advantage of tax incentives that has Morton concerned.
"Yes, several states have taken a page out of our book," he says, "but our crews here in B.C. are world class and we are holding our own so far, no matter what is happening elsewhere in the world. I think there are lots of things that we could do in B.C. in order to give incentives for investment, besides providing tax credits for producers and tax shelters for investors. We've been pushing for some new incentives."
Paul Altilia, business agent for the Director's Guild of Canada, says a strong Canadian dollar has the potential to affect future work here in Vancouver. Decisions to film are made well in advance of actual production, based on a wide variety of factors, not just the strength of the dollar.
"The value of the dollar is only one variable," says Altilia. "Our rates of pay are lower here than in the U.S. There are 32 other jurisdictions in the U.S. alone now offering tax credits, so we are now competing against a lot of people. Our original advantage here in B.C. was that we were close to L.A. and the dollar was 62 cents. My main concern lies in the long run, over the course of several years, and how the Canadian dollar sustains itself over time. If the U.S. dollar was devalued that would incentivize U.S. producers to stay at home, but not necessarily California."
Altilia says he understands Shaw's suggestion to peg the film industry dollar to 88 cents, but believes it would be difficult to implement. "I'm sure the industry will continue to monitor the situation, and if we are becoming uncompetitive then we owe it to our members to bring the topic up. We have a long history of being a collaborative industry and we are not interested in losing work. The lines of communication are open."
Over the long run, North Vancouver Liberal MP Don Bell has proposed the formation of a new "secretariat" to advise Parliament on how it can keep Canadian TV, film and related fields competitive. Bill C-453 would monitor the Canadian motion picture industry and report back to the Commons every six months with suggestions for improving the industry's place on the global stage.
"I imagine a committee made up of producers, directors, performers, distributors, and unions," says Bell. "Committee members would have the power to make recommendations for legislative changes. Currently film, TV and related media create 124,000 full-time jobs in Canada and [generate] $5 billion in revenue annually. We need to do what we can to preserve the industry."
Bell's bill has passed first reading but won't be debated until Parliament returns in the fall. Even then, as a Private Member's Bill it will be shunted to the back end of the legislative agenda, so any action will not occur until next year, if at all.
At Insight Films, Shaw is not waiting for the glacial forces of government to act. Like U.S. studios that have fled to cheaper locations, he has already moved several of his own productions out of the country. He has invested $30 million in Hungary for a TV documentary and two feature films, although he will continue to do post production work in Vancouver.
"We were nervous at first, but the crews in Hungary have turned out to be quite impressive," he says. "We are satisfied with them, and will continue to move more work over there."
Shaw says he's not the only producer planning well ahead. He knows that MGM, Lions Gate, Fox and other major U.S. studios are also "running the numbers," and looking for ways to save a buck. They are planning well into the future, including the possibility of a strike next year by the Screen Actors Guild and the Writers Guild of America.
"At Insight we are trying to build our own studio, something like RKO did back in Hollywood back in the 1940s, with our own roster of actors and our own facilities," says Shaw. "We can easily shoot outside the country, but I am a proud Canadian and we'd rather stay here. I love this industry and Vancouver is my home."
At Insight Films, the horizon looks to be infinite, but the sun may be setting on B.C. feature film production if local players snooze along until the fall, not noticing that the industry that has given Vancouver a great deal of glamour and money has quickly left town.
© Vancouver Courier 2007
