Starz always gets unnecessary flak for being owned by a US based company. Seems like that’s about to change.
Via ctv.ca:
Canadian investors buy T.O. animation studio
Touchstone Pictures’ ‘Gnomeo and Juliet’
Date: Friday Mar. 4, 2011 6:54 AM ET
TORONTO — A Canadian group is buying control of Starz Animation Toronto, a digital media studio that created the recently released feature film “Gnomeo & Juliet.”
Marketing executive J. Thomas Murray and executive producer Steven B. Hecht lead the group that’s buying a majority stake from Starz LLC.
Financial terms of the transaction aren’t being disclosed.
Starz LLC will continue to own a minority stake in the studio but plans to focus on live action-TV programming.
Starz LLC is headed by Chris Albrecht, a former chief executive of HBO from 2002 to 2007.
During his tenure, HBO produced several acclaimed television series including “Sex and the City” and “The Sopranos.”
“We are very proud of the work that the Starz Animation Toronto team has created over the last few years, work that stands up to anything coming from the major studios,” Albrecht said Thursday.
“As a minority partner, we remain committed to the growth of the company.”
Speaking for the buyers, Hecht said that under Canadian control Starz Animation will be eligible for significant grants, labour tax credits and subsidies.
The company noted that in 2009, the Ontario government announced a grant of nearly $23 million to help Starz Animation Toronto create and retain 250 jobs at its studio.
Starz Animation Toronto is a leader in computer-generated animation, which it produces for Hollywood studios and television producers.
Just curious: what “unnecessary flak for being owned by a US based company”? I’ve worked at Starz Toronto over the past 5 years and that’s the first I hear of it.
Hi Jean,
It’s come up on this site more a few times, and it’s a distinctly Canadian prerogative. Despite employing dozens and dozens of Canadians, and bringing quality feature work to our market, the company has received unnecessary criticism for being on the receiving end of Canadian subsidies while being American-owned. It’s pretty typical stuff.
Can anyone provide background information on J. Thomas Murray or Steven B. Hecht?
J. Thomas Murray is behind the Canadian Golf Network.
http://playbackonline.ca/2011/01/17/crtc-approves-three-new-specialty-channels/#
There is no obvious producer Steven B. Hecht on imdb, but there is a Steve Hecht who produced one short.
@Mark Mayerson: He is behind the Canadian Golf Network http://playbackonline.ca/2011/01/17/crtc-approves-three-new-specialty-channels/
Perhaps someone can explain this to me:
The Canadian government takes 23 million dollars from working Canadians and gives it to a private company to keep (approx.) 250 people employed for some undetermined amount of time.
If that company makes money, it stays in business and keeps employing Canadians. (this is good)
If the company loses money, it may fire staff or shut down altogether and the taxpayer money is gone. (this is a problem)
Now if the Canadian animation business is really profitable, then shouldn’t the government be giving a line of CREDIT to studios to make a movie. So a studio can go to the government and essentially borrow 23 million bucks to make a movie. If the film makes money, then the company pays back the government at minimal interest and everyone is happy. If it doesn’t make money, then the company goes bankrupt and sells every last asset to try and pay back what it owes.
I mean is this a real business or what?
If Starz can’t make back the money that it spends to make a movie, then it shouldn’t be in business. If you don’t get more money out than you put in, you don’t have a business. You have a hobby.
If established animation studios can’t survive without government support (keeping in mind, most of the work is service work for other countries, but that’s another matter), maybe the government should spend 23 million to retrain those workers in a field that is actually profitable. Why should Canadian taxpayers throw money away to give a few hundred people jobs in fields that are unprofitable?
*I should point out that GandJ obviously did make money, which is good, but that works against the point of them receiving 23 million in grant money from the government. If the government had given them a line of credit, then it could possibly get repaid for the loan and free up the money for some new project*
Thoughts?
—
Also, I really wish people would use this site. I know everyone is terrified because the animation industry here is so small, but seriously just create an alias and use it. Then maybe we can figure a way out of this mess together.
AE.
If the company loses money, it may fire staff or shut down altogether and the taxpayer money is gone. (this is a problem)
As far as I understand the system, not all of the money is loaned out at once with these grants, federal or provincial. It’s piecemeal over a course of years and there are milestones and minimum requirements attached to each release of a fund. If a production company goes under (hopefully never) whatever public money that was put into it might have to be paid back, depending on stipulations attached to a grant.
*I should point out that GandJ obviously did make money, which is good, but that works against the point of them receiving 23 million in grant money from the government.
G&J’s production budget was paid for by the Disney Corporation and Rocket Pictures’ production company called Pointy Hat, not Starz – I’m pretty sure I remember hearing that from the production accountants. Starz Animation, as far as I know, doesn’t profit from any box office hit or miss, simply earns bragging rights to the clientele and an addition to the portfolio, much like any other production shop in Canada.
As far as these production shops requiring tax breaks and credits and grants to keep the lights on, I’m not sure how that gets worked out. Any readers want to enlighten me? I’m not a producer by any stretch…?
Interesting…
Let’s assume for the moment that you’re right and Starz does not profit from the box office.
If a business is not a profit-seeking enterprise, but rather a outsourcing factory, why should the government support such a business?
AE.
If a business is not a profit-seeking enterprise, but rather a outsourcing factory, why should the government support such a business?
An outsourcing factory does make a profit, I think, IF they can complete a contract for less money than they were given to do it. Why support it? Jobs are jobs?
Hey Warren,
True. Jobs are jobs.
But does a business really ‘make’ a profit, if it needs government support to just to survive?
I guess what I’m getting at is $23 million dollars spend on studios like this is not an investment. It’s a jobs-creation program. The government takes money from one group of people so another group of people can have jobs. But are those jobs productive? If Starz Toronto made and owned films that went on to make money in theatres, then I think one could make a case about the productive use of taxpayer money to get such a studio off the ground. But if all it does is make films so Americans can reap the rewards and the Toronto studio can keep the lights on, is that really productive use of Canadian taxpayer money?
I mean jobs are great, but jobs have to be productive. Having studios for the sake of keeping people employed doesn’t make much sense, especially if you have to pump millions of dollars into them just to keep them alive.
I mean CORE is gone.
Do you think the government should have continued to keep supplying them with credit to keep them alive?
AE.
I mean CORE is gone.
Do you think the government should have continued to keep supplying them with credit to keep them alive?
To me it seems unusual that so many Canadian animation production companies NEED credits and the like to stay viable, but I’d really like to hear from studio producers and owners on that one.
As far as I could guess without really knowing, Starz is totally solvent with or without such grants. Tax breaks help any business, so everyone gets it from where they can.
I have no idea how hard it is for a studio like CORE or any indigenous studios to find steady private money in Canada, especially for animation production. I wonder if the Canadian private sector has really sat down to figure out just how much money can be made with original IPs?
More discussion on these topics are here and here, as well.
Woops – other link is: here
“As far as these production shops requiring tax breaks and credits and grants to keep the lights on, I’m not sure how that gets worked out. Any readers want to enlighten me? I’m not a producer by any stretch…?”
Studios like Starz do not own/produce their own content (other than their short films) but only provide their facilities and resources to the producer. The bid to win a project factors in on the studio’s selling points including their capacity and savings from tax credits. Tax credits are usually based on direct Canadian labor. More credits are realized by hiring Ontario locals. Therefore producers pay about 55 cents on the dollar of your paycheck. The rest is paid for by the federal and provincial government. To the producer, she gets well trained english speaking animators at close-to-third-world prices.
Studio/corporate overhead is expensive. Does it have to be? That’s hard to say. Tax credits do not apply to these costs. Ideally, running the studio at full capacity should cover those costs, but profit margins are razor thin, so poor cashflow will strangle operations. Producers never pay on time too. All these factors leave studios financially vulnerable. Tax credits give incentive to film here. But other jurisdictions compete with comparable incentives. Producers will always shop for deals. Tax credits help producers mostly, not studios by much.
Govts tend to like attracting foreign dollars. Liberty Media is huge. Ubisoft is huge. Getting them to invest here is easier than growing an industry from scratch. If the local industry was really strong or had tremendous potential, then there would be plenty of investors trying to buy in already without some economic stimulus package. Or there’s some angle.
There’s definitely an angle being played with the Canadian majority ownership of Starz Animation Toronto. The studio already gets tax credits and is the recipient of $23 million grant. But it will be hard to say until we watch their activities in the next while.
To Warren & Altered:
Telefilm Canada essentially lends money to production companies (live action and animation) to produce films and TV shows and if a producer shows a profit on his production, he pays the loan back. Jim Henshaw on his blog The Legion of Decency has explored the creative accounting which takes place with Canadian producers so that they don’t show a profit.
http://the-legion-of-decency.blogspot.com/2008/02/how-many-accountants-does-it-take-to.html
A glaring example is Kevin Sullivan who produced Anne of Green Gables. He told the Montgomery family that Anne never made a profit (which I guess is what he probably told Telefilm) while trying to put together an IPO in which he was telling potential shareholders that it was profitable. The Montgomery family were suing him for unpaid profits.
http://en.wikipedia.org/wiki/Anne_of_Green_Gables_%281985_film%29
Nice!
Thanks for the link (and the convo).
It’s nice to know that I’m not totally insane.
AE.
I came across this article today after reading the above conversation, and thought it might be worth posting for others to read if interested:
http://www.interfluidity.com/v2/1246.html
It talks about the pros and cons of film subsidies. Granted, it deals more with state-to-state competition within the U.S. rather than international tax credits and subsidies, but I think it still generally applies to a global model as well.
@ picto-chat – Thanks for the clarification!
@ anonymous 1 – Thanks for the link. I’ve always suspected the success of Mel Brooks’ “The Producers” was that it was rooted in truth like all good satires…
@ Altered Ego – thanks for starting up the discussion! Stay tuned…
Tax credits are based on the producer, content, and labour. If the producer and the content are Canadian certified then the production qualifies for bigger tax credits. International treaty co-productions are Canadian enough for the bigger credits too. Tax credit are earned at the end of production rather than during, but these credits can be pledged and loan against if project isn’t fully financed. Foreign producers generally get a basic tax credit and bank it too.
Most incentives are for producers or producers ultimately end up receiving the benefit. Studios such as Starz will forfeit their tax credit to just to win a contract.
Telefilm participates in the profit sharing of the production. It doesn’t lend money, it provides equity or assistance. We generally don’t see much profit because distribution revenue just pays for the part of the cost of production as an advance. This advance offsets the revenue earned. This is further offset by distribution fees etc.
Telefilm has a “cultural” than a profit mandate. So filmmaking is more “art” than commerce in Canada. Otherwise decision-making would be solely based on money-making productions. Wisest use of tax-payers money? Without it, would probably decimate the arts community, if anyone cares.