Canadian Producers, Broadcasters Clash Over Foreign Distribution Revenue

Rookie Blue Canada 2011

“Rookie Blue” Ben Bass as Det. Sam Swarek, Missy Peregrym as Andy McNally

A border runs through this industry feud: Private networks want a share of the spoils from sales of homegrown series like “Flashpoint” and “Rookie Blue” to the U.S. networks.

OTTAWA – Canadian indie producers are in a party mood as they gather this week for their annual Prime Time conference in Ottawa.

Having turned weakness to advantage by taking their wares to the world, the producers will toast their success in selling northern imports like Rookie Blue, Motive and Flashpoint to U.S. networks and elsewhere abroad in recent years.

But domestic broadcasters aren't in much of a mood to join the celebration.

They license Canadian TV shows for their own schedules and now want a share of the spoils from their foreign sale as they deal with encircling ad industry gloom.

Rogers Media president Keith Pelley last week went public with a call for the current terms of trade agreement between producers and broadcasters to be renegotiated for a possible foreign distribution revenue split.

“I feel it’s a little one-sided to the independent production community and, from the broadcasters’ perspective, I think it’s something we have to address in terms of the revenue share,” Pelley told a Banff Industry Day panel in Toronto about the landmark industry pact inked in 2011.

His call for the terms of trade agreement to be renegotiated also received qualified support from fellow broadcasters Kevin Crull, president of Bell Media, and Paul Robertson, president of Shaw Media, who both appeared on the same panel.

Their appeal became the latest flashpoint between Canadian producers and broadcasters, and it brought immediate pushback from Michael Hennessy, president and CEO of the Canadian Media Production Association (CMPA), representing indie producers.

“I find it sad that, even as we are celebrating the increasing success of Canadian content over the last couple years, the guns of the vertically integrated carriers seem to be turning on the creative community as the enemy,” Hennessy said, with comments setting up a clash this week in Ottawa.

The industry feud over foreign distribution revenue follows U.S. sales of Canuck dramas like The L.A. Complex to The CW, The Tudors and The Borgias to Showtime and The Listener and Saving Hope to NBC having upended the traditional master-servant relationship between Canadian producers and broadcasters.

TV producers here at one time were grateful to supply homegrown shows to patrician Canadian broadcasters able to tie up domestic TV, DVD, VOD and other digital rights. Now well-connected producers have new masters in U.S. and other foreign broadcasters as they partner up on global dramas structured as international co-productions or co-ventures. Like the servants in Downton Abbey looking to lead new lives as they lay the table upstairs, Canadian producers feel little need to give up hard-won international distribution revenues to broadcasters increasingly beset by competition from emerging digital players like Netflix Canada and Apple TV.

“I guess we did a pretty good job because they’re upset,” John Barrack, former chief negotiator for the CMPA and now strategic counsel at indie producer marblemedia, said of the current terms of trade agreement. “But these guys still hold all the cards,” he added.

Broadcasters not being allowed to exploit international rights was key to the industry pact tied to broadcast license renewals, Barrack concedes. But the door isn’t completely shut. Broadcasters can acquire up to a 30 percent stake in homegrown shows, and the share of foreign sales revenue that brings, if they pay a “super license fee” upfront.

Barrack adds that the broadcasters get a good deal, as Canadian TV shows are heavily subsidized by domestic tax credits and other industry subsidies. “The broadcasters already receive deeply discounted product, and then they want back-end participation,” he insisted.

That’s not how the broadcasters see it.

Rogers’ Pelley insists homegrown shows need to be more “economically viable” for broadcasters that license them at home and increasingly give them pride of place alongside popular U.S. series on their schedules. “Ancillary revenue beyond license fees and tax credits should first be given to the broadcaster until they recoup their investment, and then both parties can take part in revenue sharing,” he argued.

The CMPA’s Hennessy said he was willing to discuss foreign distribution revenues with the broadcasters, but only if it meant creating a partnership. “We’re happy to discuss ways to address problems we both see, at the right time. But we’re not interested in getting into any discussion where all they (broadcasters) want to do is claw back,” he said.

The Prime Time conference continues to Friday.