Copyright Craziness

Warner Bros. is accusing itself of pirating its own copyrights.  If this doesn't prove that modern copyright enforcement is hopelessly broken, I don't know what does.

Warner Bros hired Vobile to search the web for sites that violate Warner copyrights and to send notices to Google to prevent the sites from being listed in searches.  The only problem is that Vobile listed the following sites as pirates:

http://www.warnerbros.com/dark-knight
http://www.warnerbros.com/matrix
http://www.warnerbros.com/lucky-one

I hope that Vobile will become even more aggressive, listing every Warner site so that eventually Warner Bros. is completely invisible to search engines.  At that point, maybe somebody will realize that the Digital Millennium Copyright Act and its take down notices are not workable and that some sort of reasonable balance between copyright owners and the public has to be established.

Jam Filled Purchases Arc

According to C21 Media, Jam Filled has completed the purchase of Arc's assets.  There are about 200 employees returning to a facility in Toronto.  While the article specifies that the company will "take over production of current Arc projects," it does not specify what they are.  No word on whether Blazing Samurai, a feature that was in production, is still in-house or, if rumours are true, has moved to another company.

Jam Filled Entertainment Negotiates to Buy Arc

The Globe and Mail has another article behind a pay wall, providing some details.  Deloitte, the receiver, ran an auction to purchase the rights to Arc's continuing projects.  Jam Filled Entertainment, an Ottawa studio bought just weeks ago by Boat Rocker Media, won the auction.  However, the deal has to be approved by the court and Jam Filled will be doing additional due diligence before the deal is concluded.

One part of the deal is that enough of Arc's former employees are willing to return to the projects they were working on.  The hope is that the deal can be finalized within the next two weeks.

As of now, there are many questions.  I assume that the work will stay in Toronto.  If they're looking to rehire Arc employees, it's going to be easier to do this without asking them to move to Ottawa.

While the deal obviously includes contracts for the work and the files created so far, does it include the hardware that the files are sitting on?  Will they occupy Arc's former space or move to another location?  Software licenses are not always transferrable.  Will Jam Filled get rights to the licenses as part of the deal or will they have to purchase new ones?  Which clients will be willing to continue their projects with Jam Filled and which will prefer to move them elsewhere?

Will there be pay cuts for returning employees?  How much?  Will they be across the board, meaning that everyone rehired gets the same percentage of their former salary, or will salaries be negotiated from scratch?

Who will be managing all this?  As Jam Filled is located in Ottawa, will they be sending a management team to Toronto?  Will they be hiring local management talent?  As management was the source of Arc's problems, hiring the right team will be critical to the success of the salvage operation.

Will Jam Filled continue the facility, assuming it is in Toronto, once the existing contracts are completed?  That may not be decided until projects are delivered and the balance sheet is scrutinized.

While Jam Filled's acquisition, assuming it goes through, is certainly good news, much more will have to be answered before this can be called a success or failure.  Good luck to everyone.

More on the Arc Situation

The Globe and Mail has an article behind their paywall about the Thursday court proceedings relating to Arc.  I can't quote from it extensively due to copyright, but I can summarize it.

While I was quick to say that without knowing specifics, it was not fair to blame Arc's management for the shutdown, it's now clear that the management was aware of the situation for at least five months and did not do enough, if anything, to fix it.

In December of last year, Arc made an agreement with Grosvenor Park Media Fund LP giving Arc access to up to $45.3 million.  $17.5 million of that went to repay Callidus Capital Corp, a previous lender.

On Feb. 8, 2016, Arc defaulted on payments to Grosvenor.  Grosvenor twice signed waiver agreements allowing Arc to pay later and extended another $4.6 million in credit.  At this point, Arc convinced the producers of Blazing Samurai to make their $1.05 million payment due to Arc to Grosvenor instead.

Arc again defaulted on payments to Grosvenor in May and July.  In the first six months of 2016, Arc ran a $9.2 million dollar loss.  It was also behind $250,000 in rent, $2 million for office renovations and $1 million in payroll.

On July 26, Guy Collins of GFM Films, international rights holders to Blazing Samurai, sent an email to Grosvenor saying he was concerned that Arc had stopped production on the feature.  Arc was trying to get an early payment for moneys due in August from GFM.  GFM indicated that they would not be paying any more money.  With no promise of revenue for Arc, Grosvenor called their loan and forced Arc into receivership.

This does not make Arc's management look good.  Defaulting on loan payments while continuing to hire and increasing expenses is not the route to success.  While I only know what was in the article, the logical thing to do would have been to cut expenses to the bone, eliminating anything not directly related to completing paying projects.  Had they been seen to do that, Grosvenor might have been even more forgiving than they were.  Arc's management had 5 months to fix things and didn't.  What's worse, it doesn't appear that they tried all that hard.

ARC and the Hazards of Animation

The news that ARC, one of Toronto’s largest animation studios, has gone into receivership spread in record time thanks to social media.  I’ve been dismayed at many of the comments I’ve read in various places online.  Many are ignorant; some are accusatory.  I have no inside information, but anyone with experience in the animation business knows that a bankruptcy is always a possibility, especially for studios doing service work.

Everyone in animation has probably worked on a project that’s gone bad.  It could be due to demanding or ignorant clients.  It could be due to unforeseen technical challenges.  It could be due to an inadequate schedule.  If a job goes over budget, the costs have to be covered from the next job.  With luck, the profits from that job are enough to cover the loss, which leaves the studio in a break-even position.  But if the profits are not enough, or the next job goes bad as well, the debt begins to pile up.  This puts a studio in the position of using income from current jobs to pay off old jobs, and it becomes necessary to keep new jobs coming in so as to service old debts.

Every budget and schedule (really two sides of the same coin) contains unknowns.  Studios try to build contingencies into budgets to cover the unknowns, but in the competitive market that service studios face, budgets are lean and sometimes intentionally lower than the job requires.

There are valid reasons for under-budgeting.   The studio wants to work with a client that commissions a lot of work and the studio has to land a project in order to establish a relationship.  Or the studio has a crew that will finish a project shortly and needs something to keep the crew on the payroll.  Finally, there’s the need to keep money coming in to meet overhead and maybe service debt.  Every day that the studio stays alive is another chance for the studio to find the profitable job that will solve its problems.

There is also the issue of cash flow.  A studio can be profitable on paper, but if the money isn’t flowing in at a rate fast enough to meet the studio’s expenses, the studio is forced to borrow to bridge the gap.  That borrowing has costs attached to it: legal fees and interest to name just two.  If the cash flow can’t be straightened out, the interest piles up and the studio may be forced to seek other bridge financing.  The end result once again is debt that is paid by diverting money from current jobs.  This just pushes the debt forward.

Either of the above cases can drive a studio into receivership.  It’s important to understand that studios are forced into receivership by creditors.  It’s not something they would choose to do.  So when a studio shuts suddenly, it’s because the creditors have forced it to happen, not because management was trying to screw over artists.  Undoubtedly, management was negotiating with the creditors, hoping to reschedule debt payments or restructure the debt.  If the creditors decide that they’ve had enough, meaning they have no confidence that the studio can meet its obligations, they force receivership, capping their losses and hoping to recoup something from the bankruptcy.

No one – the creditors or the management – wants that to happen.  The creditors would prefer to be paid in full, something that rarely happens in a bankruptcy and won’t happen when a studio’s only assets are computers and furniture.  Management prefers to run a profitable company.  It puts more money in their pockets and makes their resumes look better.  Having a bankruptcy on a resume is not the greatest job reference.  It is possible that ARC’s management made bad decisions.  It’s equally possible that clients, competition and bad luck forced them into decisions they did not want to make.

There is no question that the closing of the studio is a tragedy for all concerned.  But without inside knowledge, no one can assume to know what went wrong.  Bankruptcies are common in all industries because sales, overhead, production and cash flow are difficult to get right.  Attributing malicious motives to this bankruptcy is wrong.  Attributing it to gross mismanagement may also be wrong. 

More than any other studio, ARC (under a series of owners) got Canada farther into the animated feature game than any other studio to date.  While the studio had an unhappy ending, it provided lots of jobs and opportunity while it lasted.  If the management is going to be criticized for the bankruptcy, the least we can do is give it credit for what it accomplished.

Startoon

The greatest danger in pitching ideas is not rejection.  While rejection is common, the one benefit to rejection is that your idea remains your property.  The greatest danger is finding a buyer, and that's dangerous because in exchange for getting your idea produced, you will generally lose ownership and control of the very thing you created.

Mike Valiquette of Canadian Animation Resources is now associated with Startoon, a competition to find an animated property worth producing.  This competition is different, because they make no claim to your ideas if you don't win.  This is in direct contrast to most other competitions, where the contest runners have the right to use your work forever in any medium simply because you entered.

It's too soon to know if this will result in a successful project or if the winning creator will feel satisfied at how he or she is treated, but it is encouraging that someone is willing to do business in a more creator-friendly way.  Watch Mike's pitch below and find the complete details here.

Canadian Content, Regulations, and Audiences

Canada's federal government is interested in revisiting rules and funding regarding Canadian culture.  In the TV business, broadcasters and cable channels are required to play a certain percentage of Canadian content daily in order to guarantee local producers access to audiences and give audiences access to local content.

As broadcast and cable were the only ways to get a show into homes, the old regulations focused on distribution.  A producer needed a letter from a broadcaster or cable channel in order to qualify for money from various funding bodies.

These days, broadcast and cable have become less relevant with streaming and torrents.  In effect, the audience has left the building and advertisers are going with them, leaving the broadcasters and cable channels with shrinking markets and dubious futures.

The question is whether the government will be smart enough to understand this and resist vested interests who will fight to preserve their positions. 

With distribution available to everyone now, through Netlix, YouTube, etc, the focus should turn to creators.  The problems creators face are financing production, earning enough to live on, and making the audience aware of their work.

While I am obviously biased in favour of creators, I'd be the first to say that those who can successfully engage the audience are a rare breed.  Many can write, draw, direct or act, but only a few can hold an audience's attention. 

Everybody can sing.  No doubt with lessons and practice, everybody could sing better.  But only some people sing well enough to sell tickets.  I teach around 150 animation students a year.  While there are usually a dozen who are genuinely good animators, there are rarely more than one or two with the ability to engage an audience.

The challenge for the government is setting up a system where those creators with the ability to engage an audience can survive economically, and the audience can be made aware of their work.

If creators succeed, government support should be withdrawn and the money and resources put towards discovering other people.  If people fail, they should be barred from reapplying for a period of time.  Too often in the past, people succeeded by working the government's system rather than creating successful products.   That ends up being a wealth transfer from tax payers to mediocrities.  Avoiding that and discovering new talent should be the focus of any revised set of cultural regulations.  It's a big challenge and I hope that the government gets it right.

The Corruption of Copyright

What is copyright?  It's a privilege granted by law.  Like many things determined by people, as opposed to nature, there's a certain arbitrariness to it.  Why is the speed limit 60?  Why is the voting age 18?  Why are certain days holidays?  It's important to remember that at various times and places, the answer to the preceding questions were different than they are now.  So it is with copyright.

Why was copyright created?  Why was this privilege granted to people who create new works?  It was invented to provide an incentive to create, balanced with a social need to enhance the culture.  If someone wrote a novel, or a play, or painted a picture and anyone could make copies to sell, what would be the incentive to invest the time and effort to create?  Why work hard so that others, who had nothing to do with the creation, could profit?  Creators needed protection to make their investment of time and effort worthwhile, so they were given a temporary monopoly on their creations, allowing them to be the sole financial beneficiaries of their work.

The fact that this monopoly is temporary is the price creators pay for their exclusive rights.  Yes, the law will protect a creator so that they can profit from their work, but only for a fixed period.  Why?  So that society as a whole can be enriched by that work after a time.  When a copyright expires, anyone can republish the work or use it as the basis for something new.  Today, anyone can use the work of Charles Dickens or Mark Twain and culture is richer for that.  You can profit from the work of others but only after they have had the chance to profit from it themselves. 

In principle, copyright works.  However, just as a speed limit or the voting age can be changed, the length of the monopoly can be changed.  Unfortunately, it has only been changed in a single direction.  While the original copyright law in the United States was for 14 years, the current copyright law is for life plus 70 years for individuals and 95 years for corporations.  Until 1976, not all that long ago, copyright lasted a maximum of 56 years.  If that were still true, anything created in 1959 or earlier would be in the public domain.  That includes a lot of Disney films and other Hollywood product.  It includes most or all of Hemingway, F. Scott Fitzgerald, George Gershwin, Irving Berlin, Norman Rockwell, and works starring Superman, Batman, Captain America, Conan, Flash Gordon, Little Orphan Annie, etc.

The Trans Pacific Partnership, a 12 nation trade deal that has yet to be signed and ratified as of this writing, would extend copyright in countries, such as Canada, to match the current U.S. standard.  In Canada, the law is currently life plus 50 years.  What would happen to the 20 years worth of material considered public domain in Canada if Canada ratifies the TPP?  Would publishers be forced to negotiate licenses after the fact with the once and future copyright holders or withdraw the material?  Would they be compensated for losses?  Nobody knows.

Another arbitrary aspect of copyright law is enforcement.  Technically, any fan fiction or art that is made publicly available, even if there is no money involved, is a copyright violation.  Often, copyright holders don't enforce their rights, either because they don't think the violators are enough of a threat to bother with or they are unaware of the violation.  At comics conventions, there are some characters that are understood to be off limits for fan art and others that are not. There are all sorts of films on YouTube that are a violation of copyright.  Some have been there for years.

Where's the line between being beneath a copyright holder's notice and provoking legal action? The problem is that there is no line.  Or rather, the line comes and goes on a case by case basis.  For instance, Paramount and CBS have instituted legal action against a Star Trek fan film, financed on Kickstarter to the tune of $1 million.  Apparently there have been earlier Star Trek fan films made without incident, but this one is a target.  Where's the line?  Was it the money involved?  The high profile?   Or did a lawyer wake up grumpy?

Even under the old copyright term of 56 years, the original Star Trek would still be protected.  But Gene Roddenberry is dead.  Many of the writers, directors and performers of the show are dead.  The executives who put the series into production are no longer with Paramount even if they are alive.  And Paramount is now owned by Viacom, which had nothing to do with Star Trek as it didn't exist until years after the series was cancelled.  I am very much in favour of creator rights, but I find it hard to see a link between Gene Roddenberry and Viacom stockholders

In the U.S., if some entity creates a cure for cancer, they get only a maximum of 20 years to benefit (and some of that time is often used up before the government approves a drug for sale).  After that, other companies can create generic versions without the expenses associated with developing a drug.  But Paramount gets to protect Star Trek for 95 years.  What kind of society values the inventors of entertainment more than the inventors of life saving drugs?  Probably the society you live in.

In the past, culture was something that emerged from a group of people sharing a time and space.  No one owns styles of language, architecture, painting, fashion, design or cuisine.  If you want to make crêpes Suzette, you don't need permission or have to pay a royalty to Suzette.  But since the invention of mass media, culture is manufactured for a profit.  The music, books, movies and TV shows that are discussed are owned and the owners restrict their use.  Even the media we use to communicate our thoughts about culture, such as this blog, Facebook, Twitter, etc. are owned.  Government owns the post office, but nobody needs permission to write a letter.  Try saying no to a terms of use software agreement and see where it gets you.

Copyright has value.  I would never dispute that.  But when it is used to lock up culture, instead of enrich culture, it has gone too far.  Yes, the makers of the Star Trek fan film do not have the law on their side.  But no one should confuse that with whether the law is just or functional.  Today, copyright is neither.

Is There an Animated Feature Bubble?

Cartoon Brew has a list of 47 animated features that will potentially be released in 2016.  Some have already been released outside North America, others are still in production.

There have been articles in the past about whether animation is wearing out its welcome or not, but now we are reaching a saturation point that is constrained by the calendar.  With only 52 weeks in a year, next year could potentially see a new animated feature released almost every week.  Is it possible for the box office to sustain that many animated films?  Even if half of them don't get a North American release, that's still a new feature every two weeks.

With few exceptions, they are aimed at the family audience.  That audience is now being courted by two other major franchises, Marvel and Star Wars, that will compete for box office dollars.  While many animated features have budgets significantly lower than those from the big studios, they still need to earn enough to make their releases worthwhile.

With so many films hitting theatres so frequently, marketing is going to be extremely important.  Films that have poor opening weekends are toast.  There will be no time for word of mouth to build before the next animated feature arrives.

Many who have jumped into producing animated features are destined to be disappointed.  That's when this bubble is going to pop.  Audiences may not care.  A dozen high profile animated features a year may be more than enough to satisfy the family audience.  But what is this going to do to employment?

People who have been in animation for the last 20 years (except for those who worked in hand drawn animated features) have not seen lean times.  The increase in TV animation, videogames and animated features has mostly been a continuous upward curve.  Those who have been around longer remember that the animation industry was not always so robust.  I can't believe that all these features are going to be profitable enough to keep their producers starting new projects.  Should producers walk away, there are going to be people looking for work.  Maybe TV and games can absorb them, but TV is experiencing its own potential bubble, with streaming being added to broadcast and cable.  Is there enough money in that system to keep everything going?

The Disneys, DreamWorks, Blue Skys and Sonys have deep enough pockets to stay in the market for animated features, but they're a minority of those 47 films.  There will always be features made for local markets in Europe, Asia and South America, but getting a North American release may become harder in the future.  Even the Ghibli films have not pulled major box office in North America, which casts doubts that many of the freshman features coming will be successful.

I could be wrong, but how many animated features a year can the market sustain?

GKIDS

Here's an interesting article on GKIDS, for my money the most interesting distributor of feature animation right now.  They've been unafraid to release hand drawn features and they have brought some of the best international animated features to North America.  They've had six of their films nominated for Academy Awards, and I've seen them all.  I look forward to their future releases and hope they continue to flourish.

Pete Williams and Undergrads

In August, Pete Williams, the creator of the MTV and Teletoon series Undergrads, gave a fabulous talk at Animatic T.O. relating the history of creating the show and getting it on the air.  It was a warts-and-all presentation, where Williams was forthcoming about the mistakes he made.

He has a lot to teach anyone interested in selling a TV series.  Until you've done it, you don't really know all the pitfalls and gotchas, so take advantage of the his experience and watch the presentation.

No Spec Work

I've written about creator rights.  I'm especially against contests, which are all over the internet and a really pernicious way for companies to solicit work for free.  Here's a great comic by Maki Naro about the problems of spec work and here's Mark Evanier on spec from the writer's side, but it still applies to anyone creative.

Don't Pitch a Buyer, Pitch the Audience Video

In March of 2014, I had the pleasure of giving a talk at Animatic T.O, an informal lecture series founded by Barry Sanders and continued by Andrew Murray when Barry took a job in Halifax.  Grayden Laing of the Canadian Animation Blog videotaped the presentation and now it's available online, courtesy of Grayden and John Righton.

I developed the talk into a series on this blog.  The first part of that series has been read almost 10,000 times to date.  Since giving the talk, my opinions haven't changed.  I've seen nothing in the intervening time to suggest that creators are getting a better deal anywhere.  I would love it if someday, a stranger walked up to me and told me that as a result of my talk, he or she kept ownership of their property and are making a living from it.  Hope springs eternal.

Tax Credits, Exchange Rates and Thin Ice

(Updated Below)
Canadian Animation Resources has good coverage of Nova Scotia's decision to reduce it's tax credits for film and TV production (1, 2, 3).

It's going to be a painful disruption for many people.  Undoubtedly, some studios will close, and some will shift work to another location.  Those lucky enough to be offered jobs elsewhere will have to uproot their lives and relocate to another province.  I'm sorry for everyone who will be affected by this.

This is an ongoing problem in Canada and I've seen it in multiple industries over multiple decades.  Too many companies base their existence on some kind of government protection (such as content quotas, tax rebates and before free trade, import duties) or on the exchange rate, as the Canadian dollar is generally worth less than the American.

The problem with this approach is that it adds more variables to the already difficult puzzle of making a profit.  Creating a product or service, pricing it properly, marketing it and fending off competition is never easy.  When government policy or exchange rates are added in, companies are at the mercy of things they cannot control.

There is also the upcoming issue of the CRTC's pick and pay decision.  As of next March, cable subscribers will be able to abandon packages of channels in favour of only paying for what they want to watch.  To date, YTV has been paid for by everyone in Canada who subscribes to cable, whether they have children or not.  They will undoubtedly lose subscribers.  Teletoon is part of a package, and no one knows what percentage of the people who purchase it actually watch it.

(Update: Canadian Press is reporting that the number of cable subscribers fell by 95,000 in 2014.  That compares to a drop of 13,000 in 2013.  It estimates that Netflix went from 3 million to 3.9 million subscribers in Canada last year.  Even without the CRTC decision, revenue for cable channels, where the majority of Canadian animation appears, is dropping and that is bound to have an effect on production levels, budgets and deadlines.)

While the animation business in Canada is booming at the moment, I'm not optimistic.  I worry about a contraction coming within the next two years.

Canadian gaming studios tend to be either very large or very small.  There are branches of Ubisoft, Rockstar and Electronic Arts in Canada.  There are also small indie studios that are often less than a dozen people.  Those small studios are surviving due to low overhead and a business model that allows them to sell directly to consumers over the web.

I suspect that Canadian animation studios are too married to series production and international financing to be able to work the low end of the market.  I'm waiting (and hoping) to see the entertainment equivalent of indie game companies arise, where small groups develop their own intellectual property and take it directly to the audience.

So long as Canadian studios depend on government regulations and the exchange rate, they are skating on thin ice.  We'll see how well Nova Scotia withstands the reduction of the tax credit, but what's happened in Nova Scotia could happen anywhere in Canada.   I hope that studios are preparing for that eventuality.

New CRTC Rules

The world of television is changing rapidly and the Canadian Radio-Television and Telecommunications Commission is attempting to catch up.  It set forth new rules today and while the new rules do not mention animation specifically, they will undoubtedly affect animation production.

Where in the past, specialty channels (which include channels like YTV and Teletoon) had individual requirements for the amount of Canadian content they ran, now all specialty channels will have the same requirement to run Canadian content 35% of the time.  I can't find YTV's former requirement, but Teletoon's was 60%.  They can now run considerably less Canadian programming.

While the CRTC has mandated that broadcasters must spend the same dollar amount as before, reducing the requirements for Canadian shows means fewer shows with higher budgets.  This may be a problem for studios that don't own broadcast outlets.  Nelvana and DHX are well positioned, as they will undoubtedly favour themselves with higher budgets rather than have their channels purchasing more expensive shows from other Canadian studios. If Nelvana subcontracts, will their subcontractors see any of the increased budgets or will the the subcontract budgets remain the same with any increase staying with Nelvana?

I'm afraid that these new rules will put the squeeze on smaller studios that rely on broadcasters and cable channels for their sales.  Can Netflix or Amazon take up the slack?  If not, there's a chance that we're going to see less production in the near future. 

The Canadian TV animation industry is presently as large as it has ever been.  At Sheridan, we are being approached by studios that are trying to get a jump on Industry Day and hire students before they graduate.  Those of us who have been around for awhile have wondered how long the industry expansion can continue.  It's possible that these new rules, put in place to improve quality and give broadcasters more flexibility, may not be good for Canadian animation. 

Canadian TV is Dying. Does Animation Know it?

Over the last year, Rogers and Shaw, the two largest cable TV suppliers in Canada, have lost a total of 200,000 subscribers.  That has enormous repercussions for TV producers, including animation studios.

YTV is one of the major outlets for Canadian TV animation.  It is part of the basic cable package, which means that everyone who has cable TV in Canada automatically receives YTV.  YTV receives money for each cable TV subscriber, and it has lost the fee from 200,000 people in the last year.  In addition, it earns money from advertising and its ratings must have suffered by some amount, as some of those 200,000 people must have watched YTV.

Teletoon is part of a cable bundle, but surely some of those 200,000 people were paying for Teletoon.  As Teletoon also sells advertising, the smaller audience has cost Teletoon income on two fronts.

The cable companies are rapidly diversifying away from TV.  Rogers and Shaw have partnered in Shomi, a Netflix-like service that makes content available on demand.  Rogers has now partnered with Vice, which will produce content for them.  The money quote that justifies the deal is that there is a “dramatic shift in Canada’s media landscape which sees young people increasingly consuming news and entertainment from their mobile and digital devices.”

Bell Media is creating its own streaming service.

What are the repercussions for Canadian animation?  It means that broadcasters such as YTV, Teletoon, and Family Channel will have less money to spend on new programming.  Either they will buy less or buy the same amount but provide less money for each.  Either way, the TV market for Canadian animation is going to get tougher.  The future is online and the cable companies know it.  The animation studios that grasp this are the ones most likely to survive.

Book Review: The Webcomics Handbook

While comics are not animation, there is a great deal of overlap, both in terms of artists as well as how artists are marketing their work these days.  In this way, animation artists who are interested in using the web as a revenue source, or are interested in self publishing or exhibiting at conventions can find a wealth of advice from Brad Guigar's The Webcomics Handbook.

Guigar has been doing webcomics since 2000 and is the founder of Webcomics.com, an online site dedicated to sharing knowledge with artists who are marketing and selling their work online.  He is the co-author of How to Make Webcomics, a book I plugged earlier.

The value of Guigar's latest book is how incredibly specific it is.  If you're looking to create a website with earning potential, Guigar will talk about various hosting sites and their relative advantages and disadvantages.  He lists the various approaches to securing advertising for sites.  He even has tips for speeding up page loading.

Guigar talks about the pitfalls of collaborating and how to avoid them.  He has a chapter devoted to self-publishing, including information on print-on-demand vs offset.  He has a chapter devoted to conventions and how to best present yourself at them as well as the economics of attending shows.

Other topics include copyright, contracts, insurance, search engine optimization, collectives, merchandise, and booth barnacles (fans who hang around your table at cons and monopolize your time without buying anything).

I have never seen a book about artists using the online world with as much practical advice.  My only complaint is that the book lacks an index.  However, that is a small complaint.  If you have ever considered using the web as a revenue source, there is something in this book that will help you. 

A Challenge to Studios Taking Pitches

The Ottawa International Animation Festival starts on September 17 and studios will be there to recruit.  As well, Nickelodeon will be there soliciting pitches for preschool shows.  I'd like to issue a challenge to Nickelodeon and any studio that takes pitches, though I'm confident that this challenge will be completely ignored.

I'd like studios that are looking for pitches to make their minimum deal public.  How much of the copyright, if any, will the creator get to keep?  What screen credit will the creator be guaranteed?  How much will the creator get per episode that's produced?  What guaranteed employment will the creator get on the project?  What percentage of online, merchandising, publishing and home video revenues will the creator get?

While I have no confidence that companies like Viacom, Disney, Warner Bros. or Fox will take this challenge, it presents an enormous opportunity for smaller studios looking to own intellectual property.  Imagine a studio that offers to let the creator keep half of the copyright and half the profits from all revenue streams.  Creators with confidence in their ideas would be fools not to take their work to that studio first.  Imagine if a studio agreed that if the project wasn't viable after a limited time, the creator could recover 100% of the copyright in exchange for reimbursing the studio for it's production and marketing costs.

We're in a transitional period.  What we think of as TV is shrinking and the online world of Netflix-like and YouTube-like entities are expanding.  Before the online world solidifies, as it inevitably will, a studio able to attract the best content because it offers the best deal would have a competitive advantage.

It would obviously benefit creators, but the point is that it would be good business all around.

Media companies hate bidding wars.  As early as 1909, Biograph was trying to suppress the names of their performers, afraid that they would ask for more money.  However, Carl Laemmle hired Florence Lawrence and Mary Pickford away from Biograph and publicized them in order to increase demand for his films.  As much as media companies would prefer it otherwise, the business is based on talent.  If a studio is taking pitches, what will it publicly guarantee to the talent?

And if you're a creator, do you have the nerve to demand to know the deal before you make the pitch?

Goodbye Canadian Content?

UPDATE: Those of you interested in what's happening to TV in Canada should read this article in The Globe and Mail.  It's a good summary of all the potential changes that are coming and how it might change the production landscape.  The reader comments show the level of animosity towards the cable companies and broadcasters.  You can't hold an audience with regulations, only by giving them something they want to watch.

There's an alternate TV universe developing in Canada.  It looks a lot like the old TV universe.  In fact the majority of the programming comes from the old TV universe, but there's an important difference: it comes via the internet and not cable channels.

So what?  Well, you can impose Canadian content quotas on cable, because no service gets on cable unless the Canadian Radio and Television Commission approves it.  And the CRTC always imposes conditions on any license it grants.

However, the CRTC has decided to keep its hands off the internet, precisely because it can't stop anyone from using the internet to distribute content.

There are huge repercussions from this.  First, when there were limited channels available and they had to run Canadian content, there was a demand (even it if was mandated demand and not audience demand) that had to be filled.  Second, when the public paid for cable TV and when the cable channels earned money from advertising, a percentage of the money was put into the Canadian Media Fund, which provided money for the production of Canadian content, including animation.

The problem started when Netflix came to Canada.  It allowed viewers to pay a flat monthly subscription rate to watch anything on the service.   As Netflix arrives via the internet, it has no legal obligation to put money into the Canadian Media Fund or to use Canadian content.  When a generation of young adults who have declined to have cable TV combines with disgruntled viewers who cut their cable to lower their bills, the cable companies panic.  Their billing is dropping and the shrinking audience will force advertising revenues downwards as well.  That's a one-two punch aimed at Canadian content.

Shaw and Rogers, the two largest cable TV providers, are fighting back.  They're collaborating to create Shomi (pronounced "show me") to compete with Netflix.  That's like Coke and Pepsi collaborating on a new soft drink, a move that could only be driven by desperation.  Bell Media has just purchased a library of older shows from HBO for their own version of video on demand.  Suddenly, the cable TV business has the cooties and everyone is running away from it.  Because these new services are on the internet, there's no obligation to run Canadian content and none of the subscription money goes to the Canadian Media Fund.

This will make it harder to produce original animation in Canada.  With lower ad rates, less money in the Canadian Media Fund and the audience abandoning cable, there will be less demand for Canadian content and it will be harder to finance.  For better or worse, studios interested in creating shows will have to compete with the rest of the world, without the government carving out a protected space for them.

There will still be service work, but that doesn't bode well for the future of Canadian animation.  Service work is sensitive to currency fluctuations.  The Canadian dollar has ranged as low as 63 cents and as high as 1.03 compared to the U.S. dollar over the last decade or so.  In addition, there is the volatility of tax credits and government subsidies.  The new government in Quebec has cut their tax credits due to their deficit.  Any deficit-ridden government (which is all of them at the moment) will be looking hard at expenditures.  Service work is great for cash flow, but the flow stops when the job is delivered.  There are no residuals and no money from merchandising.  Studios doing service work are always just a few months away from a potential bankruptcy.

This could be a great opportunity for Canadian studios, forcing them to cut the government's apron strings and grow up, but I'm doubtful.  History hasn't demonstrated that Canadian studios are eager for that challenge.  In the last 35 years, no studio has walked away from government protection or money to stand on its own.

While Canadian animation is booming right now, the future is uncertain at best.  The entire notion of Canadian content quotas may disappear quickly, not through government decree, but through cable TV erosion.  While Canadian studios have worked hard to satisfy the regulations, now it's time for them to focus on satisfying the audience if they want a healthy future.

Is Canadian TV Animation Heading for a Cliff?

The TV animation business in Canada is on a roll right now.  There's a lot of work out there, as a glance at the job board at Canadian Animation Resources confirms.  While animation in Canada includes visual effects, features and videogames, TV still makes up the greatest proportion of production in terms of employment and the amount of material produced.

However, there are trends in several areas that make TV animation vulnerable.  The ground is already shifting and there are more shifts to come.

Television in Canada is regulated by the Canadian Radio and Television Commission.  This government body determines which new channels will be allowed to exist, sets quotas for Canadian content and determines how much money from cable fees will be set aside for Canadian production.

The CRTC is aware of the effect that the internet and internet TV providers such as Netflix are having on the market and have been holding hearings to determine how regulations should change.  There are several possibilities being considered.  One is unbundling. 

The CRTC has declared that certain channels such as YTV, a major Canadian animation market, are part of the basic cable package.  In other words, everyone who has cable is forced to pay money towards YTV.  Other channels featuring animation, such as Teletoon and Family Channel, are part of packages.  You cannot buy these channels on their own.  There are customers who don't care at all about animation who are contributing money towards these channels by purchasing the package they're included in.

Should the CRTC unbundle, allowing viewers to purchase only those channels they want, no one can predict how this might effect the demand for animation channels.  The number of cable channels using animation has expanded to include Nickelodeon, Teletoon Retro, Cartoon Network Canada, Disney XD, Disney Junior and Treehouse.  Can the Canadian market support all of these channels in an a la carte world?  Can studios survive if the number of Canadian buyers goes down?

There is an entire generation that has replaced TV with the internet.  The term "cord cutting" is used to describe people who give up cable TV, but there are many young adults who haven't had cable TV since leaving their parents' homes.  Walking in Toronto, I see children in strollers playing with iPads.  In a world of on-demand entertainment, does the concept of a broadcast schedule have a hope of surviving?

The shrinking audience is affecting even mainstream programming.  W5, a 60 Minutes-like news show has just cut production on the number of episodes for the coming season and laid off staff due to shrinking ad revenues. 

Many in Canada subscribe to Netflix instead of cable.  No money spent on Netflix is re-routed towards Canadian production as it is with cable bills.  This means that the Canada Media Fund, which funnels money towards various productions, has less to work with.

Finally, there is the issue of tax credits.  Ontario just had a provincial election, so the government will be stable for the next four years, but it is trying to eliminate a deficit. No poll of the general public has ever put tax credits for media production high on the list of priorities.  As a result, I would not be surprised to see the tax credits frozen at best and I anticipate some amount of claw back.  Certainly, they won't increase, which means that if another jurisdiction surpasses Ontario's tax credits, work will leave Ontario.

While content quotas, bundling and tax credits have their place, especially for new enterprises, they turn into an addiction.  Ultimately, animation has to please the public if it is to survive.  Instead, too many studios have focused on satisfying regulations that generate money rather than on creating viable entertainment.  I fear that they have built their enterprises on a foundation of sand.  I have seen contractions in the Canadian animation industry in the past and they're not pretty.  I hope that studios are preparing for changes that may destroy their current business model.

To learn more about this, read Michael Geist and listen to this Canadaland podcast.