RUNAWAY—Production Companies Head to Canada to Compete

As part of a growing industry-wide battle to cope with runaway film production, Arleta-based special effects firm MastersFX Inc. has opened a second studio in Vancouver, B.C. The fact that nearly half of the company’s expected $2 million in revenue this year will come from U.S. production companies doing business in Canada made the decision easy, said Todd Masters, MastersFX Inc. owner and president. “You can’t ignore the fact that so much business is done in Canada,” said Masters. Before setting up the office, Masters and his staff have commuted frequently between Los Angeles and Vancouver to do business. At this point, 15 of his 50-person staff work in Canada. Masters’ move north is only the latest in a continuing migration by companies, both large and small, trying to hang on to business, even as production is headed away from Hollywood. Already, some of Hollywood’s biggest studios and related firms have gone north to take advantage of the low taxes and the cheap labor, said Karen Constine, director of the California Film Commission. Studios like Sony Pictures, Paramount Pictures and the Walt Disney Co., and foundations of the film industry like Woodland Hills-based motion picture camera maker Panavision Inc. have all opened facilities in Canada in recent years. Los Angeles-based Lions Gate Entertainment Inc. built its own film studio with nearly a dozen soundstages in Vancouver where the weaker Canadian dollar buys more than the U.S. dollar. Smaller companies that constitute the backbone of the Valley film industry are also finding the move inevitable. Companies like Kushner-Locke Co., Gekko Film Corp., Atlantis Alliance Group and Levy-Kramer Productions all now operate second offices in Vancouver or other parts of Canada. “It’s basic economics. You get these budgets that just won’t allow you to shoot in L.A.,” said Tim Kramer, a partner with Levy-Kramer Productions in Los Angeles, who last year opened a permanent production office in Toronto. According to a 2000 study commissioned by the Directors Guild of America and the Screen Actors Guild, American-financed film and TV productions done outside Los Angeles resulted in a $10.8 billion loss to the U.S. in 1998. That dwarfs a similar figure of $2 billion in 1990. The study showed that Canada accounted for 18 percent of all runaway productions. Mark DesRochers, director of the British Columbia Film Commission, said L.A.-based production activity in his Canadian province has grown tenfold in the last 10 years. “Companies find it much easier and less expensive to come work here,” DesRochers said. Panavision, for instance, established its first office in Canada in 1978 and opened two others in the early 1990s, said Jeff Flowers, general manager of the company’s Vancouver office. Paramount Pictures, Universal and Sony Pictures all opened studio facilities in Canada in the 1990s. “Production has been growing every year and it’s clear that Canada is very cost-effective for companies coming here,” Flowers said. MastersFX vice president Sean Taylor estimates the company spent about $100,000 to open its Vancouver office, which handles work for HBO’s drama series, “Six Feet Under.” “But we have a lot going for us, with a lot of contacts and referrals. It’s really about the people you know.” Not every Hollywood firm, however, is headed north. And some that have are already back in the San Fernando Valley. Burbank-based XFX Inc. opened a Vancouver office in 1997, only to close it in 1999 because the volume of business coming its way didn’t justify the expense. “It just didn’t work out,” said Taylor, a former technician with the firm. Companies like Burbank’s Jim Henson Productions, which makes the Muppet films and runs a creature and makeup shop for “Sesame Street” and other shows, said they have no plans to open an office north of the border. MastersFX, which specializes in rubber creatures and digital animation, was established by Masters in 1986, with $250,000 in revenue that first year and $1.8 million last year. Masters said his enhanced presence in Vancouver should help boost what has so far been a flat year revenue-wise. “It’s been a really dry summer for a lot of filmmakers. There was a lot of production last year because of the threat of the writers strike, but it dropped off this summer and it hasn’t really come back. But we’ve been fortunate and we’ve managed to get a few television series going that allow us to have consistent production,” he said. Besides HBO’s “Six Feet Under,” MastersFX’s biggest projects have been the Sci-Fi Channel’s “Farscape” and the “Star Trek” series of films. The company’s Canadian facility, which opened last month, features a creature shop that makes rubber monsters, computer work stations for digital animation and administrative offices, much like its main office in Arleta. Masters said the move also gives producers a chance to use high-end creature and makeup effects without having to return to Los Angeles. “There are shops up there that are still in the ’80s and that’s because they don’t do stuff as regularly as we do, so their skill and level of understanding the materials and the types of effects don’t seem to be up to par,” he said.