Canadian Dreams and American Control: The Political Economy of the Canadian Film Industry 9781442602397

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Canadian Dreams and American Control

Contemporary Film and Television Series General Editor Patricia Erens Rosary College Advisory Editors Peter Lehman University of Arizona Gorham Kindem University of North Carolina at Chapel Hill Lucy Fischer University of Pittsburgh John Fell San Francisco State University

CANADIAN DREAMS AND AMERICAN CONTROL The Political Economy of the Canadian Film Industry Manjunath Pendakur Foreword by Dallas W. Smytvhhe

GARAMOND PRESS Toronto

Garamond Press edition published in 1990 in cooperation with Wayne State University Press. Copyright © 1990 by Wayne State University Press, Detroit, Michigan 48202. All rights are reserved. No part of this book may be reproduced without formal permission. 94

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Canadian Cataloguing in Publication Data Pendakur, Manjunath Canadian dreams and American control Includes bibliographical references and index. ISBN 0-920059-93-7 1. Motion picture industry—Canada—History. 2. Motion picture industry—United States— Influence. 3. Motion picture industry—Economic aspects. 4. Canada—Foreign economic relations— United States. 5. United States—Foreign economic relations—Canada. I. Title. PN1993.5.C2P36 1991 384'.8'0971

C90-095795-6

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To my Mother and the memory of my Father

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In many countries, there is a theory afloat that, if you strangle the American film that is being exported abroad, by some osmosis their own native film industry is going to spring in full splendor, like Aphrodite from the foaming sea, as a mature and nourished film industry. The fact that this theory is defective, even absurd, and certainly wrong, is of no avail to us. It pursues us around the world with a malignant fidelity. —Jack Valenti, President, Motion Picture Export Association of America, testifying in 1977 before the Subcommittee on International Operations of the United States Senate Committee on Foreign Relations at hearings entitled "Implications of International Communications and Information" You will never make a successful film if your motivation is money. That's been proved time and time again. The important thing is that you have got to make films out of your own heart, out of your own mind, out of your own dreams. And we have got to get to the situation where we can supply our artists and our talented people with the way to do that and without them being sucked into New York, Paris, London, and Hollywood, where they'll give the money to make their own dreams. —Norman Jewison, at a panel entitled "State of the Art and Industry," Canadian Images Conference, 1980

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Contents Illustrations 11 Tables 13 Foreword by Dallas W. Smythe Acknowledgments 27 Introduction 29

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Roots of Dependency, 1906-1930 45

2.

Dependency Deepened, 1920-1940: The American Film Industry Cartel 79

3.

In the Shadow of the U.S. and British Film Industries 95

4.

State Intervention and the Battle to Gain Control 132

5.

Tax-Shelter Policy and the Industrialization of Canadian Cinema 169

6.

Coproductions and Merchants of Culture 194

7.

The Combines Law Revisited: The Cineplex Case 222

8.

Free Trade Anxieties: National Institutions and Cultural Autonomy 251

Appendix of Tables 277 Notes 281 Bibliography 307 Index 321 9

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Illustrations Andrew M. Holland and George Holland 46 Ernest Shipman 50 Jule Allen 52 N. L. Nathanson 57 Adolph Zukor 58 The front gate of Paramount Pictures studios 63 Carl Laemmle 71 Will H. Hays and Jesse L. Lasky 81 Nicholas Schenck 98 J. Arthur Rank being received by Canadians 106 J. Earl Lawson 107 Eric Johnston 140 N. A. Taylor 147 Michael D. Spencer 151 Jack Valenti 165 Tommy Tricker and the Stamp Traveller 187 Lea Pool directing Lafemme de Vhotel 190 Lafemme de l'hotel 191 Scanners 207 Garth H. Drabinsky 224 Cineplex Odeon Beverly Center, Los Angeles 227 Cineplex Odeon Madison Cinemas, Toronto 228

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Tables 1.

Feature Films Distributed in Canada by Country of Origin, 1966-1972 31

2.

Market Share for Large Chains and Single Theaters, 1937 and 1947 101

3.

Average Per Screen Gross Revenue Shared by Two Major Circuits and Independents, 1975 113

4.

Market Share of Famous Players Limited, 19721977 114

5.

Film Rentals Paid by Famous Players to Major Distributors, 1971-1975 116

6.

Allocation of First-Run Feature Films by the Majors to the Two Principal Theater Circuits 118

7.

Gross Rentals from Top Foreign Markets for American Majors, 1974-1986 121

8.

Estimated Number of Feature Films Produced in Canada, 1960-1970 144

9.

Categories of Feature Films Financed by the CFDC, 1968-1974 152

10.

Release Dates of Seven Top-Grossing English Canadian Feature Films in Three Key Markets 156

11.

Selected CFDC Supported Films: CFDC's Investment and Financial Recovery 158 13

Tables

12.

Certified Productions by Year and Budget, 1974-1986 172

13.

Breakdown of Costs for Certified Feature Production, Canadian and Non-Canadian 177

14.

Certified English-Language 1979 180

15.

Impact of Coproductions on Canadian Film Industry Workers in Key Creative Positions, 1964— 1983 200

16.

Sources of Revenue and Structure of Distribution Deals for Selected Canadian Feature Films 204

17.

Estimated Number of Feature Films Launched by American Companies Worldwide, 1981 — 1983 218

18.

American Majors' Releases: In-house versus Outside Acquisitions, 1980-1986 220

19.

Cineplex Theaters and Their Location, July 1983 226

20.

Eligible Exhibitors and Relative Market Power in the Nine Major Theatrical Markets, 1984 239

21.

Comparison of First Runs Licensed to Cineplex, 1983-1984 241

22.

Comparison of First Runs Licensed to Independent Exhibitors, 1983-1984 242

23.

Security Ownership of Cineplex Odeon Corporation by Management and Others, January 31, 1987 247

Feature

Films,

Graphs 1. 14

Total Number of Key Creative Personnel for Certified Feature Productions, 1974-1983 174

Foreword In the spring of 1976, Manjunath Pendakur came to my office at Simon Fraser University to say that he wished to enter our communication doctoral program. He wanted to focus his research on communication in India. It was not until much later that I learned he had been fascinated by motion pictures from an early age; it had been a family joke that he was going to be a film man when he grew up. He had been born and raised in the family of a substantial merchant in a village in the state of Karnataka. I told him I knew very little about India but that with the help of a sociologist colleague from India we should be able to formulate a suitable doctoral program for him. He drafted several dissertation proposals on a topic directly connected with India, all of which presented severe logistical problems. He then proposed one on how the U.S. major film-producing corporations had come to control distribution—and through it exhibition—of films in Canada so that no indigenous Canadian film production industry had been allowed to develop. It was an appropriate topic for one concerned with film because Canada appeared to be the only highly industrialized country with this peculiar characteristic. The result was a doctoral dissertation and a Ph.D. in 1980. In the next eight years he has had a sustained pace of high-quality research and publication: Twelve articles in refereed journals, three chapters in books, twelve papers presented at research conferences, two research reports for the National Film Board of Canada and the Canadian Department of Communications. In addition, he has presented papers at ten scholarly conferences, given invited lectures at many universities, as well as carrying a normal schedule of teaching and advising students. He is now an Associate Professor of Radio-TV-Film at Northwestern University in Evanston, Illinois. Pendakur states in the first chapter both the scope and method used 15

Foreword

in preparing and writing Canadian Dreams and American Control: The Political Economy of the Canadian Film Industry. Its scope is an answer to the question, How did it happen that Canada has no feature film industry of its own, when all other countries with pretensions to being "developed" and many Third World countries do? He locates the answer in an analysis of several major and many relatively minor contradictions. The immediate contradiction is between the needs of capital and the expressed needs of the Canadian people for feature films autonomously conceived, produced, distributed, and exhibited by Canadians. He relates that struggle to the parallel contradictions through which Canada is maintained in a dependent relationship to the United States in all sectors—citing oil and natural gas, broadcasting, electronic "technology," magazine publishing, environmental protection, and, conspicuously, the educational system. The free trade treaty recently negotiated by the Mulroney government and the Reagan administration, approved by the Canadian electorate at the polls, will reinforce Canada's dependency and accelerate its assimilation to the U.S. system for the foreseeable future. Underlying the relationship of dependency on the United States for Canada and most countries is the principal contradiction between the needs of the world's people and capital. Recently, the way the dependency relation is established was brought to my attention by a leading Australian national newspaper, the Australian: What's the point of saying no to America's nuclear ships when we've said yes, a thousand times yes, to the Trojan horse of American culture, dragging it in through our city gates into our very loungerooms. MGM is mightier than the CIA. Paramount more powerful than the Pentagon. Warner Brothers wields more influence than the White House. . . . For it has changed the way we see the world. . . . Day by day, hour by hour, word by word, as idiom yields to idiom, our very identity is being modified and moulded. . . . For many adults [television] occupies more time than full employment. For most kids it occupies more time than school. . . . It is the most powerful, all-persuasive medium of all times. . . . Most of our television time is occupied by foreign programming and the overwhelming majority of that alien imagery is American. . . . Consequently Coca-Cola has the highest market share in the world here in Australia. . . . Our advertising agencies are owned, overwhelmingly, by Americans. . . . Having eluded our quarantine officials, the rabies-like infection of Christian fundamentalism is spreading medieval hatreds of homosexuality, abortion and thought. Along with Kentucky Fried Chicken, we've the Kentucky fried faith of creationism being taught in Queensland schools. By following American electioneering styles we've turned our elections into 16

Foreword

auctions. . . . We are, all of us, little by little, becoming ventriloquial dolls for another society. We are losing our authenticity, our originality, and becoming echoes.*

Professor Pendakur's method is explicitly stated to be radical political economy, which "combines tools from neoclassical and Marxian economics to analyze Canada's dependency on imported feature films. The political and economic are not seen as distinctly different societal processes, as idealists would have it, but ones which interpenetrate all the time. . . . Marxian political economy's concern with power in class societies and its emphasis on a dialectical view of history help explain how the battle to create an indigenous film industry has been fought in Canada, in whose interests, and with what outcome." He also uses conventional industrial organization theory when discussing competition and monopoly. He states in detail the sources of data used in the book. I wish that the idealists whose work mystifies and glamorizes the status quo in society also would openly avow their method, and especially their theory, of how change takes place. The central issue that integrates the whole analysis revolves around four distinguishable elements commonly identified by critical theorists in a colonial dependency situation: (1) the population of the colony and its other resources; (2) the "international" (i.e., imperial) owners of capital based outside the colony who will be interested in the colony according to whether they can profit from investing in it or not; (3) that sector (or "fraction" as it is commonly called) of the capital situated in the colony that is substantially concerned with the welfare of the people and other resources in the colony, commonly referred to as national capital; and (4) that sector (or fraction) of the capital within the colony that prefers policies within the colony that favor foreign capital over the interests of the population and resources within the colony (I will refer to this as foreign capital). The dominant class located within a colony (the national and foreign capital) share a common interest—their loyalty to capital as such. And that loyalty is the basis of their joint role as the dominant class in the colony. In that role (called the comprador role in Third World countries), they are in a difficult position. Their success in maintaining their status as the compradors depends on maintaining a rough equilibrium between using national policies that will satisfy the needs and interests of the people in the colony on the one hand and, on the other *The Australian Weekend Magazine, June 22-23, 1985, p. 2.

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Foreword

hand, using national policies that will maximize profits for "international capital." If the compradors use national policies that please international capital but displease the colonial people too much, they lose their legitimacy as a ruling class. When this happens, as it did with Batista in Cuba, leaders in Chile before Allende, the Shah in Iran, and Marcos in the Philippines, a change in government and a potentially revolutionary situation occur. A new ruling-class formation arises from the remaining national and foreign capital sectors combined with power organized around peasant movements, religion, labor unions, and so on. This new government faces the same predicament as the old one: risking total break with international capital and trying to survive autonomously outside the scope of international capital. That road usually leads to a total war imposed by international capital (and in Chile to imposition by the United States of a fascist regime, supported by the foreign and the remains of national capital within the country). Or, if for geopolitical reasons a socialist superpower offers a military and economic shield—as it did for Castro's Cuba—the new indigenous ruling class consolidates an alternative road to that of international capital. However, if the colonial ruling class antagonizes international capital too much, its government is removed more quietly from office by international capital with the eager cooperation of the colony's usually dominant foreign capital sector by manipulating public opinion via colonial institutions. Canada offers an example. In 1957, a Progressive Conservative Party under Diefenbaker, a populist from the prairies, ousted the "foreign capitalist" Liberal Party government and formed a government to follow a national policy favored by the "national capitalist" sector and vaguely nationalist in character. A prime requisite of an independent country is that it have control—formal and informal—of its own armed forces. Canada became a colony of the United States in 1940, when the Ogdensburg Agreement was reached between the two governments. This agreement permanently placed the Canadian armed forces under the direction of the Permanent Joint Board of Defense, located in Washington, D.C., and controlled by the U.S. military. Even many Third World countries whose military is informally under U.S. control nevertheless have formal control; Canada had been in that position from 1920 to 1940. During the Cuban Missile Crisis of 1962, the Kennedy administration placed the U.S. military on a "red alert"—the last stage prior to releasing missiles. The decision in Washington was to put the Canadian armed forces on such alert as well. 18

Foreword

Before this happened the Canadian prime minister was consulted by Washington, and he refused. But with the consent of the Canadian minister of defense, the Canadian armed forces were put on red alert. Diefenbaker allowed his shock to become public. Open, public intervention by President Kennedy, the U.S. State Department, and the U.S. embassy in Ottawa helped to overthrow the Diefenbaker government in the 1963 general election and to replace it with the "foreign capitalist-dominated Liberal Party.* Two aspects of dependency analysis need amplification. First, what does "capital" mean in this context? It is, above all, a relationship—an asymmetric relationship. It is not a thing. Removed from its relational context, money would be powerless. (What use would money be to a lone individual marooned on a desert island?) Capital is a social power relationship by which a minority—usually a very small minority—of the population is able to obtain the use of others' labor and the use of labor's products in pursuit of profits and interest on its capital investments. This relationship is the web of social institutions that support and reproduce this power imbalance. A legal system, backed by the armed force of government, is the most obvious basis of the relationship. While common usage implies that private property is an objective thing, in the eyes of the law it is not. The legal system of capitalism consistently has held that property is the right to possess and to use another person (as in slavery) or other part of nature. There are three types of property rights: rights vested in the state (or government); rights vested in a community for common use (whether small, as in a village common, or global, as in the legal ownership of the rights to use the radio spectrum); and private property rights. It is this last category of private property rights that underpins the ideology of modern capitalism. Since the fifteenth century, modern capitalism has eaten up much of what used to be regarded as state and common property rights. Private property inspires the endless greedy pursuit of personal possession of everything. Since the 1890s, the "Consciousness Industry"—that cluster of monopolistic industries including advertising, the mass media, cinema, telecommunications, electronics, other service industries (tourism, banking, insurance, both legal and illegal gambling), and all consumer goods industries—has promoted possessive individualism. This principle is the basis of the design and marketing of products and services. As a result of this ideological *Dallas W. Smythe, Dependency Road: Communications, Capitalism, Consciousness and Canada (Norwood, N.J.: Ablex, 1981), pp. 200-2.

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Foreword

assault, the family, the formal educational system, religious institutions, and local, regional, national, and international communities have been eroded and smashed in the core of industrialized countries. The Consciousness Industry, with its attendant ideology, is expanding into peripheral countries. This is the web in which international capital, foreign capital, and national capital exist. Second, what degree of autonomy does the government of a colonial dependent such as Canada have? According to Pierre Trudeau, prime minister in the 1960s, 1970s, and early 1980s, Canada is no more independent of the United States than is Poland of the Soviet Union; both have the freedom to make about 10 percent of their national decisions. In that situation, how does the politico-economic process work to decide whether to, say, outlaw the vertical control of the Canadian theatrical film market by the Hollywood cartel? Or to impose quotas on imported feature films, country by country? Or to create a box-office tax and subsidy system to ensure the existence of an autonomous Canadian feature film industry? Or to take any combination of these measures? How do the political and economic decision makers simply continue to be submissive to foreign control of the feature film market? This is the fascinating issue that runs the length of Pendakur's book. One thing is sure: the Canadian government is never neutral. Pendakur's analysis suggests that a Canadian feature film industry depends on the conditional autonomy of the Canadian government in a particular set of conditions—if indeed such conditional autonomy ever exists. Such conditions for a firm national policy to create a feature film industry have never existed in Canada. He traces the many failed attempts to achieve these conditions. After reading the manuscript of his book, I drafted a simplified outline of the attempts and their frustration by the Canadian federal government, ably prompted by the lobby the U.S. majors are ready to deploy in Ottawa whenever their very lucrative monopoly is threatened. In despair of ever getting it condensed enough to fit into this foreword, I tried a caricature of it in the form of a continuing politico-economic situation comedy with a plot line reminiscent of the "Yes, Minister" TV serial produced in Britain. The result was so absurd that I decided readers had better see the tragedy and comedy of the story as told in the book for themselves. This cynical ritual of Canadian government duplicity has continued to the present. In 1987, Flora MacDonald, then minister of communications, admitted, "No fewer than seven Ministers since World War II have attempted . . . to reach a negotiated agreement which would as20

Foreword

sure a Canadian presence on Canadian screens. None has succeeded." Pendakur remarks that from 1966 on, three cabinet ministers have bowed to U.S. pressure, most recently when President Reagan persuaded Prime Minister Mulroney to support the U.S. majors' vertical control of the Canadian film industry rather than MacDonald's bill to impose minor restrictions on the U.S. monopoly. Underlying that gross ritual, however, the struggle for an autonomous Canadian industry from the 1960s on formed the pro-Canadian autonomy side of the controversy in ways that cast doubt on the distinction so often made between Canadian national capital, Canadian foreign capital, and international capital and the so-called conditional role of Canada's federal government. The 1950s and 1960s in Canada, as in the United States, yielded popular protests and demands for changes in government policies. Canadian Francophones (about onethird of the total population) were more vigorous in this protest than the dominant Anglophones. Separatism became a powerful movement among Francophones, taking the form of a new political party, the Parti Quebecois, supported by strong cultural ferment that involved creative artists, workers in industry generally, and national capital in Quebec. (For those not familiar with Canada, I should venture the generalization that separatism has a double meaning in Canada. Since its military conquest by the British in the eighteenth century until the 1960s, the Francophone minority has been treated as an inferior and conquered people by the Anglophones and has struggled for its cultural autonomy. However, the Francophones have feared that the overwhelming strength of the Anglophones south of the border is perhaps an even greater threat to the survival of their way of life.) Film production, TV and radio programming, books, magazines, and newspapers were all shaken by the ferment. It was facilitated by the new technical possibilities of lightweight 16mm cameras and high-quality portable sound recording. The National Film Board responded positively to and stimulated this cultural ferment by offering professional leadership in film work. The "Challenge for Change," begun in the mid-1960s, was a plan under which NFB producers and technicians went to communities to make films which were conceived by local people and addressed to local problems. Indigenous feature-length film production in Francophone Canada reached heights of development that won many prizes in Europe. The corresponding movement in Anglophone Canada was weaker but still conspicuous. As a minimal nationalist gesture the Liberal government of Canada 21

Foreword

made bilingualism mandatory for all federal employees and for crown corporations. Pendakur shows how, in this context, national capital inside Canada was a web that aligned Canadian businessmen engaged in motion picture theaters, real estate development including shopping malls, and a few banks and insurance corporations with the efforts of motion picture producers and creative artists. In the early 1970s organizations of film producers were formed in both the Francophone and Anglophone areas of the country. Their purpose was to lobby for national policies to break the U.S. monopoly control, for example, by film quotas and taxes on the earnings of the U.S. majors, the proceeds to be used to finance Canadian feature film production and for laws which would permit them access to theater screens. The federal government responded to this cultural ferment by creating the Canadian Film Development Corporation in 1967 to "foster and promote the development of a feature film industry in Canada" by providing part of the funds required for producing a film from general tax revenues. Later, this was supplemented with a program of capital cost allowances, by which investors in approved films were allowed to deduct part or all of their investment as offsets to other income in calculating income taxes. The government pursued this policy while refusing to attack the vertical structural monopoly of film distribution and exhibition by the U.S. majors, or to impose import quotas on foreign films, or to adopt the common (in other countries) device of box-office taxes linked to subsidies for domestic producers. Pendakur describes well the twists and turns in the administration of the new policy to use taxpayers' money to subsidize production of films in Canada. It did increase the number of feature films produced in Canada with participation by some Canadian private capital and the work of creative artists. However, as he shows, only a very small proportion of these films ever reached Canadian screens (the majors' monopoly of distribution and exhibition saw to that). More importantly, his analysis reveals the divisive effort this capital subsidy policy had on Canadian national capital and its web of creative artists. By the end of the 1970s the Canadian Association of Motion Picture Producers was split. A majority believed Canada could only develop a Canadian film production capacity if it would aim at the world market, even if that market was substantially controlled by the U.S. film industry. The minority held that the internationally acceptable films were only imitations of Hollywood films and that even these would only be distributed worldwide in the event of a shortage of films produced in the United States. The burst of film production in Canada by Canadi22

Foreword

ans, stimulated from the public purse, also divided the creative talent. Many directors, writers, and actors used their Canadian production experience to join the Hollywood talent pool. The supporting craftspeople from this Canadian experience were similarly split. Most of the creative talent, however, preferred jobs on films that imitated the Hollywood product to unemployment. Further removed from the urge of artistic integrity was the financial core of national capital which automatically opted for world market policy. It may be argued that this splitting would have been reduced had the government first moved to dismantle the U.S. film monopoly in Canada or to impose quotas or a box-office tax linked to production subsidies. Perhaps the direct assistance with public funds was more divisive. I am not sure that the actual form of government action made any difference. In a section of Chapter 6, "Ideology of'World-Class' Film," Pendakur draws on his own experience in producing feature films to clearly delineate the artistic choice presented by this issue. The "world-class" feature film (Hollywood model) requires certain elements: stars as performers, producers, directors, and writers; unique locations and costumes; bigger-than-life sets; special effects; and, most basically, a simplistic linear narrative line with the tempo and pace reaching a narrative climax that focuses on the character and values of individuals. By contrast, the "rough-edged" Canadian independent film does not require any of this. Its film style tends to mix documentary and dramatic elements; it does not adhere to a simplistic linear narrative line aimed at a narrative climax. Its stories arise out of reality rather than imposing a standard formula on reality. Its political-social themes often reflect real problems faced currently or historically in Canada. It also contains types of characters seldom found in U.S. commercial films. Finally, it is not afraid of an unhappy ending; in the real world problems are not reducible to individuals. The costs for the stars, locations, sets, and special effects for "world-class" films raise the production budget to Hollywood levels. To recover the costs and make a profit usually requires a good market in the United States and (captive) Canadian markets plus foreign exhibition outside North America. By contrast, the costs of producing a feature film Canadian-style are much lower and could be recovered and a profit made from the Canadian market alone if there were assured distribution to Canadian theaters, with appropriate publicity such American films receive. Pendakur concludes, "Subscribing to this ideology of world-class film means the reinforcement of servility in the nations of the periphery. Reclaiming and reinterpreting their history ought to be a high priority 23

Foreword

for decolonized nations. Films and other media can play a vital role in that process." It is a cry from the heart. The Cineplex case, the subject of Chapter 7, provides another perspective on national capital in Canada. Reduced to bare essentials, Cineplex was a substantial chain of theaters owned by Canadian national capital in its early years. It suffered from the monopoly practices of the majors' vertical monopoly of film distribution. Cineplex overexpanded its theater holdings and was on the verge of bankruptcy. Its leading entrepreneur, Drabinsky, appealed to the Restrictive Trade Practices Commission, which was then administering an anticombines law that had apparent jurisdiction over cinema distribution and exhibition. For the first time ever, the result was a victory over the U.S.-dominated vertical control structure and a precedent-setting relaxation of some of the monopoly practices that existed. Cineplex not only escaped bankruptcy; it grew rapidly. By June 1984, Cineplex bought control of Odeon, which was the second largest chain of theaters in Canada and amply taken care of by the distribution policy of the U.S. major. By this time, Drabinsky and Cineplex were attractive to the Bank of America, which financed further expansion. By August 1985, Cineplex was larger than the Paramount—Famous Players enterprise in Canada. This wave of expansion gave it control of 1,060 screens in 391 locations in North America, including screens in twenty-one U.S. states. Cineplex-Odeon then joined forces with the Music Corporation of America (a giant entertainment conglomerate), selling MCA half of Cineplex-Odeon's equity. In three short years, this Canadian nationalist capitalist had become one of the major elements in the core of the U.S. entertainment complex of industries—solidly entrenched in international capital. It is amusing to note how brazenly Drabinsky switched sides. By 1986, he publicly opposed Minister of Communications Flora MacDonald's bill as "unethical" and "alarming." Cineplex-Odeon's policy in Canada has not changed the vertical monopoly structure of which it became a part. Finally, what can we conclude about the supposed national nature of Canadian national capital in the cinema business? Pendakur puts it well: "They seek state intervention when they are pitted against international capital. But when it is profitable to join hands with those forces, . . . they invoke the myth of the free market. . . . Consistent with their class character, the comprador elements would oppose any intervention by the state in restructuring the distribution scheme." This casts serious doubt on the thesis of the conditional autonomy of the state. When the chips are down a capitalist, whether national, 24

Foreword

foreign, or international, will always act like a capitalist. One is prompted to ask Pierre Trudeau just what kind of decisions were the 10 percent Canada could decide for itself? Whether or not to adopt a new flag? A constitution? Whether or not to require distinctive uniforms for the several branches of the Canadian military? Certainly, decisions that U.S. corporations could regard as inimical to their interests would not be among the 10 percent. Pendakur's last chapter, "Free Trade Anxieties: National Institutions and Cultural Autonomy," brilliantly summarizes the book. His overall conclusion is that in regard to cinema (as in regard to computers, telecommunications and high technology) Canada's communication policies do not help build up Canadian autonomy or employment. Rather, these policies devote enormous Canadian resources to building the strength of transnational corporations, all of which operate in markets anywhere in the world with loyalty only to the bottom line. Most of them are headquartered in the United States and employ more people in Third World countries or the United States than they do in Canada. The inevitable result of Canadian communications policy has been to deepen Canada's dependency on the United States at the expense of very large grants paid for by Canadian taxpayers. This book stands in stark contrast to the flood of idealist rhetoric about an important and often neglected sector of Canadian mass media. Dallas W. Smythe Simon Fraser University Burnaby, British Columbia May 1989

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Acknowledgments I owe my intellectual debt to many, but principally to Professors Dallas Smythe and Thomas Guback. They—along with Herbert Schiller and others—have struggled to establish political economy of communications as an alternative mode of critical inquiry in North America where logical positivism has been dominant. Their critiques of my work and the high standards they set have been my guiding light. Many corporate and union leaders, workers, and artists in the American and Canadian film industries helped me by giving their time for interviews. I have provided a list of them in the bibliography, and I am grateful to all of them. Of particular importance is Kirwan Cox, without whose help this project may not have been done at all. A researcher, filmmaker, and union activist for an indigenous national cinema, Kirwan inspired me with his commitment and tenacity. He generously shared his research and his knowledge of the issues and guided me to resourceful people in the industry and government. Another Canadian I met during my initial fieldwork was Don Partridge, chief investigation officer at Consumer and Corporate Affairs Canada. Don took a keen interest in my project and helped me with documentation. Certain historical events, especially if they were buried in corporate board rooms, cannot be easily reconstructed without the help of the insiders. I am particularly grateful to Chris Salmon, former chair of Odeon Theatres, whose wealth of memory about the history of the Canadian exhibition and distribution business was crucial to document some of the missing pieces of the historical puzzle. Garth Drabinsky, president and chief executive officer, Cineplex Odeon Corporation, generously provided the information and documents about his efforts to build an integrated entertainment company in Canada. I appreciate their wit and candor, which made the interviews memorable. 27

Acknowledgments

Several institutions were helpful in my effort to gather data for this book: Telefilm Canada, the Department of Communication, Film and Video Certification Office, National Archives of Canada, Wisconsin State Historical Society, and the Princeton University Library. Sylvie Robitaille, acting head of Documentation and Public Service/Moving Image and Sound Archives, National Archives of Canada, and Mary Corliss, assistant curator at the Museum of Modern Art, assisted me in finding some of the photographs. Several filmmakers and distributors loaned me photographs from their films, some of which appear in the book. I appreciate all their generous help. The manuscript was read at various stages by Professors Jack Ellis, Vincent Mosco, Janet Wasko, and Nathan Godfried. Their comments were critical in motivating me to look further and improve it. My special thanks go to Professor Patricia Erens, general editor of the Contemporary Film Studies Series, and the anonymous readers who made important observations and suggestions for change. Many thanks are due to Kathy Kamphoefner, who typed the manuscript, and to Jeanne Sparrow for her assistance with library research. Based on the data gathered for this study, I have published articles in the Journal of Communication and the Canadian Journal of Communication. Earlier versions of two chapters have also appeared in Current Research in Film: Audiences, Economics, and Law (Vols. 2 and 4), which were edited by Bruce A. Austin. I am grateful to all these editors. Parts of this study were funded by the following institutions: Social Sciences and Humanities Research Council, Ottawa; Department of Communication, Government of Canada; Canadian Embassy in Washington, D.C.; National Film Board of Canada, Montreal; Quebec Government Office in the Midwest; and the School of Speech at Northwestern University. The professional team at the Wayne State University Press deserves a note of appreciation, particularly Wendy Warren Keebler for her meticulous editing of the manuscript and Anne Adamus for managing the production of the book. My deepest gratitude is reserved for my friends—Chuck Kleinhans and Nathan Godfried—and my family—Roja, Sumi, and Viji—whose support sustained me throughout the preparation of the manuscript.

28

Introduction Motion pictures are the most pervasive and powerful means of expression in our time. For any independent nation which wishes to nurture its people, or convey to others a distinctive identity, the development of an indigenous, authentic motion picture industry is indispensable. —Canadian Film Development Corporation, Annual Report, 1981-82

Despite pronouncements that attempt to legitimize the nature of state intervention (subsidies and the like) in cultural institutions, Canada remains a cultural colony of the United States. This historic development—the Canadian people's submission to expanding U.S. power and resultant dependence—is most acutely felt in the feature film industry.1 While 97 percent of theater screen time in Canada is filled by imported films—most of which are marketed by U.S.-based media transnational corporations (commonly known as the majors)—most films produced by Canadians languish in cans. After two decades of public assistance to productions through the Canadian Film Development Corporation (CFDC), the number of films produced in Canada has steadily risen. A generation of actors, producers, directors, and other craftspeople has been nurtured, some of whom have won international acclaim. Yet regardless of the number and quality of films produced in Canada, they remain obscure and inaccessible to moviegoers, and their profitability is severely limited.2 One government report estimates that 90 percent of the nearly $ 1 billion in annual revenues from film and video markets are controlled by the U.S. majors.3 Since 1974, Canada has had the dubious distinction of being the 29

Introduction

number one market for American feature films. While the branch plants of U.S. film production and distribution companies and their affiliated theater circuits are thriving in Canada, the same cannot be said of independent, Canadian-owned enterprises in production, distribution, and exhibition. This book addresses a debate—argued in Canada since at least the mid-1960s—over the vital issue of developing a national film industry (production, distribution, exhibition) with a policy of producing films for the Canadian people versus a Canadian film industry with a policy devoted to producing films for the American and international market. The contending forces in the industry—Canadian workers, Canadian capitalists, and the international capitalists (the American majors)— have participated actively to shape the outcome of the debate. I will show how the different priorities of American capital, certain sections of Canadian capital, and the Canadian filmmakers' need to serve the Canadian people with films autonomously conceived, produced, distributed, and exhibited have shaped the Canadian film industry. I will argue that the fundamental contradiction between the needs of capital and the needs of people—workers, audiences, and artists—has determined the nature and course of Canada's film industry. Various government agencies have mediated this contradictory relationship with the effect of preserving the preeminence of capital while spending millions of dollars assisting Canadian cultural expression. Although the battle to create an indigenous Canadian film industry is not lost, fast tax write-offs have helped Canadians make American imitations for the U.S. and international market. The logic seems to be, Why have the analog of General Motors (Canada)—inviting U.S. branch plants—when the same results can take place via Canadian tax laws? An argument commonly heard in the Canadian film industry is that moviegoers in Canada freely choose American films over Canadian ones because the American films have superior box-office ingredients such as stars, sets, special effects, and the like. There is some credibility to the argument. In a 1978 nationwide poll, 39 percent of the respondents answered that they considered Canadian films inferior to those produced elsewhere. However, the number of respondents who said Canadian films were "much better" (1 percent), "somewhat better" (11 percent), and "about the same" (22 percent) as compared to nonCanadian films, constituted 34 percent of the total sample.4 Canadians have commercially supported such films as The Apprenticeship of Duddy Kravitz, Mon oncle Antoine, Why Shoot the Teacher? Who Has Seen the 30

Introduction

Table 1 Feature Films Distributed in Canada by Country of Origin, 1966-1972 1966

1967

1968

1969

1970

1972

314 121 52

253 34 165

291 90 131

80 8

98 10

113 53

294 134 71

United States France Great Britain Italy Canada Other countries

228 157 62

210 148 70

71

81

174

109

108

69

TOTAL

637

623

649

669

786

719

108 11

106 8

116 35

Source: Statistics Canada, Annual, 63—207, as presented in Department of the Secretary of State, Bureau of Management Consulting, Evaluation of the Canadian Film Development Corporation, Vol. 2, September 1974, p. 1.

Wind? and Le declin de Vempire americain. Many Canadian films have won critical acclaim around the world; so the problem may not be simply that Canadian audiences dislike all Canadian films. A look at the films available in Canadian theaters offers suggestion about why the problem exists. Table 1 lists feature films distributed in Canada by country of origin of the years 1966 to 1972. Imports from the United States comprised between 33 percent and 48 percent in those six years. The share of the distribution market for Canadian films varied from a low of .02 percent to a high of almost 1 percent. It is hard to tell from the table if the films from Great Britain and other European countries were produced and distributed by the American majors. If that data were known, the percentage of films from the American majors would be even higher. With the increase in the number of films produced in Canada, there was some improvement in the percentage of Canadian films entering theaters. Canadians produced 58 features in 1977, but only 24 of them found their way into theaters. The total number of theatrical features distributed in Canada during the year was 970, of which Canadian films made up a meager 2.5 percent.5 The largest number of films distributed were imports from the United States totaling 490 features, or 50.5 percent of all feature films shown that year.6 This situation has remained the same for more than a decade despite the efforts of the federal and Quebec governments to secure a place for Canadian films in the nation's theaters. Canadians continue to be primarily exposed to imported films.7 31

Introduction

Audiences can only be formed for films that are effectively available to them. The free-choice argument is no more than the myth of consumer sovereignty which masks the demand created by film-distributing companies through massive advertising and promotion. Furthermore, the free-choice argument assumes free and open competition between American and Canadian film production and distribution companies for theatrical markets. To understand why Canada is the biggest consumer of American films, one has to go "far beyond the words, voices and film images which are our contact points with the media," as Humphrey McQueen says in his study of Australian media.8 It is necessary to investigate the structures and policies of the dominant firms in the Canadian feature film industry from its early years in order to see why Canada is dependent on imported films and why it is unable to develop a viable indigenous film industry. The reasons for Canada's dependency on imported American films cannot all be found within the Canadian film industry. The problem is more complex, and it must be viewed in the wider context of Canada's status as a dependent capitalist state. Canada transferred its allegiance from its colonial master, England, to the emerging superpower, the United States, immediately after World War II. While Canada's historical development as a rich dependency of the United States has been documented elsewhere,9 a few important features of that relationship are noted here. Canada has been the chief destination of U.S. direct investment since the turn of the century, accounting for a consistent 25 percent. In the aftermath of World War II, when the United States expanded its investment worldwide, Canada's share of that investment remained constant. The book value of U.S. direct investment in Canada is estimated to be nearly $40 billion. This amounts to about 80 percent of all foreign investment in the country.10 According to Joan Gherson, an economist with the Foreign Investment Review Agency of Canada, one consequence of the size and age of U.S. direct investment is its ability to grow from earnings generated in Canada. She concluded that in recent years retained earnings of foreign subsidiaries have been the principal source of additions to foreign direct investment.11 Foreign direct investment is generally in the most lucrative and key sectors of the economy. For example, 78 percent of Canada's oil and gas, chemicals, automobile, and electrical products industries are controlled by U.S. investors. The appetite for foreign capital in the Canadian economy seems voracious. W. D. Mulholland, chair and chief executive officer of the Bank of Montreal, the thiid largest bank 32

Introduction

in Canada, reportedly estimated that Canada's economy would require the equivalent of $700 billion to $750 billion of new investment —in constant U.S. dollars—during the remainder of the 1980s.12 While that forecast suggests the possibility of increasing control over the Canadian economy by foreign capital, it is not without opposition in the country. Gorse Howarth, commissioner of the Foreign Investment Review Agency, noted a number of problems associated with the transnational corporation's control of the Canadian economy: Make no mistake about it, most Canadians recognize and acknowledge the signal contribution that foreign investment, including U.S. investment, has made to Canada. . . . But we are also aware of the costs associated with at least some of that investment. . . . I am, of course, referring to situations where a substantial proportion of foreign-controlled Canadian businesses are in effect restricted to servicing the Canadian market, are not permitted to take advantage of export opportunities, do not have any research and development program nor any reasonable measure of autonomy in decision-making and technological innovation. . . . Canadians are understandably quite sensitive to the behavior of foreigncontrolled corporations whenever it affects their chances of getting high-skilled employment, their ability to participate directly in the development and benefits of industry and, especially, their ability to determine their own economic destiny. Public opinion polls have consistently shown strong popular support for measures designed to remedy problems of this sort. 3

Former prime minister Pierre Trudeau described Canada's inability to control its economic destiny very well: "Living next to the United States is in some ways like sleeping with an elephant. No matter how friendly and even-tempered is the beast, one is affected by every twitch and grunt."14 Trudeau's comment refers in part to decisions made on Wall Street and in Washington which deeply affect Canada's economic development.15 For instance, the Reagan administration's policies in the early 1980s of maintaining high interest rates contributed to a recessionary trend that spilled over into the whole international system, not just Canada. The dominant position held by U.S. capital in Canada produces contradictions that often lead to government policies attempting to protect the interests of certain sections of indigenous capital. The state assumes the role of referee of relations between various sections of capital, both foreign and domestic, and tries to resolve the often conflicting interests between them. That is not, however, to say that it functions as a neutral institution. Principal policymakers often use 33

Introduction

nationalistic rhetoric to articulate and justify the nature of state intervention. The long-standing struggle between the continentalists and the nationalists in Canada may seem like a battle. These conflicts in ideas and policies are bound by the long-term goal of preserving monopoly capitalism in Canada. While individual capitalists may often collide with each other because of their short-term goal of profit maximization, the state functions as an autonomous (not neutral) institution mediating between those competing interests.16 Protectionist Canadian policies do not attempt to overthrow foreign ownership and control of the Canadian economy. They are merely aimed at restructuring the relationship between foreign and indigenous capital and between various sections of the indigenous capital in order to provide for greater participation for certain indigenous capitalists. In other words, these continuing conflicts between various sections of capital remain cast in the general framework of American hegemony in Canada. When maneuverability within that hegemonic framework becomes restricted for indigenous capitalists, it produces conflicts between the hegemonic power and the dependent state. Even in such instances, not all indigenous capitalists unite against the international capitalists.17 This can be observed in many conflicts between the United States and Canada over such issues as the oil and natural gas industries, high technology, acid rain, magazines, and broadcast signal spillover into Canada from stations in border cities.18 With the integration of American capital into the Canadian economy, the imperial relation is secured and maintained more fundamentally within the Canadian civil society itself via mass education and mass media. American Horace Sutton wrote in his 1950 book Footloose in Canada that Canadians have come to accept as normal the fellowship of consumption and the freedom to "master the possibilities" of consumption: Visitors from the United States will find that Canadians have adopted American commerce and culture. They brush their teeth with Pepsodent, fill their noses with Vicks, do their wash with Oxydol, laugh with Bob Hope, cry with "Our Gal Sunday," and most any summer afternoon any one on the street can give you the score of the Yankee-Indians game in Cleveland.19

The relationship between Canadian audiences and the imported mass media appears ambivalent at best. Canadians have time and again expressed interest and anxiety about the overwhelming pres34

Introduction

ence of U.S. media content on Canadian television screens and in motion picture theaters. They have backed various government initiatives to support Canadian cultural production. However, they strongly endorse the notion that Canada should not close its borders to imported culture. This paradox makes the issue of national cinema more problematic. To what extent will Canadians be interested patrons of Canadian film? It is hard to determine because Canadian movies are seldom screened regularly in the nation's theaters. Many Canadians have historically opposed the continentalization of their economic and cultural life. With the creation of the Canadian Broadcasting Corporation in 1936, Canadians were griven a state-run monopoly with the responsibility of fostering a cohesive modern national identity. Their anxiety over the loss of Canada's cultural sovereignty is documented in numerous studies, including four Royal Commission reports, a committee report, and a Senate report.20 A common theme underlying these reports is the significant presence of foreign content in Canadian mass media and the federal government initiatives to alter the situation in favor of Canadian content. Consider the following statement, which sums up the intractable nature of cultural policy in a dependent state such as Canada: It is equally clear that we could have cheaper radio and television service if Canadian stations became outlets of American networks. However, if the less costly method is chosen, is it possible to have a Canadian nation at all? The Canadian answer, irrespective of party or race, has been uniformly the same for nearly a century. We are prepared, by measures of assistance, financial aid and conscious stimulation, to compensate for our disabilities of geography, sparse population, and vast distances, and we have accepted this as a legitimate role of government in Canada.21

One cannot ignore the fact that since World War I, the United States has recognized and used media exports as tools of mass persuasion. The U.S. Congress created the Committee on Public Information to spread "the Gospel of Americanism" shortly after America entered the war.22 In this first official effort to sell America abroad, a governmentrun wire service, movies, books, English-language classes, and advertisements were employed. The committee's war films were forced on film exporters. It called on American businesses in foreign countries, missionary groups, the YMCA, and the Red Cross to distribute the committee's propaganda. This massive effort to promote American culture and values laid the groundwork for the policy of cultural diplomacy which came to be articulated at the end of World War II. Senator 35

Introduction

William F. Benton, then assistant secretary of state, explained the policy this way: "The State Department plans to do everything within its power along political or diplomatic lines to help break down the artificial barriers to the expansion of private American news agencies, magazines, motion pictures, and other media of communications throughout the world. . . . Freedom of the press—and freedom of exchange of information generally—is an integral part of our foreign policy."23 Senator Benton could very well have added other U.S. exports, from Coca-Cola to computers, which make up the U.S. con• • i 24 sciousness industry. Film has been an early and fundamental stratum in the multilayered flow of information which includes wire services, books, magazines, radio, television programs, advertising and public relations material, and teleprocessing of data from the advanced capitalist countries to the periphery. The American film industry has been a pioneer in setting the pattern for the one-way flow of cultural commodities to countries around the world.25 The American film producer-distributor combines, through their subsidiaries and investments, have also set the pattern for exporting the Hollywood-style film with all its attendant ideological ramifications as part of the structure of domination. Film is a powerful medium of communication. It carries images of people and societies, mythical and otherwise, to distant lands. All films carry ideas and have the power to impart them to the viewers. This is especially so when there are no other images and ideas of other cultures with which to compare them. Often the ideas may be in direct conflict with those of the importing nation. For many years the U.S. Department of Commerce has recognized that films can actively "sell" various commodities used as props.26 Knowing the propagandist qualities of the film medium, the U.S. government has consistently assisted the American film production and distribution companies, through diplomatic and other means, to become established in foreign markets, including Canada. The Informational Media Guaranty Program launched in 1948 under the auspices of the Economic Cooperation Administration paid U.S. dollars to media exporters in areas of the world where hard currency was in shortage. The program was conceived to achieve both economic and propaganda objectives.27 As early as the nineteenth century, U.S. policymakers realized the importance of trade and commerce, not just for the wealth it brought home but also for the ideological benefits accruing from it. Senator James Beveridge of Indiana articulated the U.S. position in 1898 rather eloquently: 36

Introduction

American factories are making more than the American people can use. American soil is producing more than they can consume. Fate has written our policy for us; the trade of the world must and shall be ours. And we shall get it as our mother, England, has told us how. We will establish trading posts throughout the world as distributing posts for American products. . . . Great colonies, governing themselves, flying our flag and trading with us will grow about our posts of trade. Our institutions will follow our trade in the wings of our commerce. And American law, American order, American civilization and American flag will plant themselves on shores hitherto bloody and benighted by those agencies of God henceforth made beautiful and bright.28

Senator Beveridge's vision of an American empire along the lines of the British empire has not materialized in its entirety, given the changed world situation, which is underscored by successful national liberation struggles mounted in the former colonies of the transatlantic empires and the rise of the U.S.S.R. as a contending superpower. The modus operandi of the new system of imperial relations between the United States—which had become the center of the world system by the end of World War II—and the countries of the periphery was the subtle and mystifying policy of cultural diplomacy.29 The policy of cultural diplomacy is more important to the United States now than ever before. Frank Stanton, an influential spokesperson in the U.S. communications industry and former president of the Columbia Broadcasting System, explained the new role of communications in the post-Vietnam period: "While the United States retains considerable, perhaps predominant power in international affairs, the capacity of America to dictate the course of international events has diminished. This means that the United States will have to count more than ever on explanation and persuasion. The new premium on persuasion makes cultural diplomacy essential to the achievement of foreign policy goals."30 Herbert Schiller has documented how the U.S. government latched onto the self-serving doctrine of the "free" flow of information after World War II to facilitiate the establishment of American media enterprises in the weakened British empire. According to Schiller, The economic imperative initiates the cultural envelopment, the impact extends far beyond the profit-seeking objectives of some huge media monopolies and cultural conglomerates, important and powerful as these combines are. The cultural penetration that has occurred in recent decades embraces all the socializing institutions of the affected host area. And though this, too, occurs mostly for economic reasons, the 37

Introduction

impact is felt throughout the realm of individual and social consciousness in the penetrated provinces.31

Schiller clearly sees cultural diplomacy as the changed source of exploitation in the reorganized international structure of domination or neocolonialism. He calls this diplomacy cultural imperialism, which he defines as "the sum of the processes by which a society is brought into the modern world system and how its dominating stratum is attracted, pressured, forced, and sometimes bribed into shaping social institutions to correspond to, or even promote, the values and structures of the dominating center of the system."32 Such coercion may not be needed at all to sustain dependency in Canada as the national elites have participated actively in reproducing that dependence on the United States, despite the expression of resistance from certain sections of the Canadian population. For Schiller, though, cultural imperialism is a penetrating process, whereby the institutions of mass media must be captured by the dominant power. His argument is brought home by Spyros Skouras, president of Twentieth Century-Fox in the post-World War II period, who articulated what he called the "sacred duty of our great medium to help enlighten humanity": [It] is a solemn responsibility of our industry to increase motion picture outlets throughout the free world because it has been shown that no medium can play a greater part than the motion picture in indoctrinating people into the free way of life and instilling in them a compelling desire for freedom and hope for a brighter future. Therefore, we as an industry can play an infinitely important part in the worldwide ideological struggle for the minds of men and confound the Communist propagandists. 33

Ideological battles to win people over to one side or the other continue, but neocolonial relations are riddled with contradictions. While cultural diplomacy is important for the United States to maintain its dominant position in the world, the need and demand for cultural autonomy have occupied the central position in international communication relations in the last quarter-century. The various debates under the aegis of the United Nations Educational, Scientific, and Cultural Organization (UNESCO) and the resulting call for the New International Information Order may be characterized as the Third World's attempt to restructuring communications relations at the supranational level.34 Unlike some media-importing countries that have cultural screens such as language, mythology, and religion which give them a distinct identity, Canada (exculding Quebec) lacks such barriers. In the ab38

Introduction

sence of legislated protective measures such as screen quotas which are commonly found in most importing countries around the world, U.S. feature films cross the border into Canada unhindered. In light of this, evaluation of national policies toward the development of an autonomous national cinema in Canada takes on added significance.

Analytical Tools I have employed radical political economy, which combines tools from neoclassical and Marxian economics, to analyze Canada's dependency on imported feature films.35 The political and economic are not seen as distinctly different processes, as idealists would have it, but ones that interpenetrate all the time. I have attempted to identify, in as much historical detail as possible, the development of Canada's feature film industry as a by-product of the interaction of political and economic institutions in Canadian society. Marxian political economy's concern with power in class societies and its emphasis on a dialectical view of history help explain how the battle to create an indigenous film industry has been fought in Canada, in whose interests, and with what outcome. The following two operational questions must be considered when analyzing the structure of the feature film industry and the market relations: (1) What elements of competition and monopoly exist in the Canadian motion picture industry's three principal sectors of production, distribution, and exhibition? (2) How do they relate to the apparent dependency of Canada on foreign films? Three key concepts from industrial organization theory help us examine market structure: degree of buyer or seller concentration, condition of entry, and degree of product differentiation.36 The theory assumes that they determine the competitive strategies or market conduct of business rivals. It is assumed that market behavior ultimately determines size of profits, efficiency of production, and rate of innovation. Character and variety of product choices offered to consumers and size of advertising expenditures are also givens. Additionally, there are nonmarket factors that influence business performance such as general demand, industry-government relations (antitrust laws), conglomeration, and cartelization. Film as a commodity has some unique characteristics that should be kept in mind. It is both a tangible product and an intangible service. It 39

Introduction

is not a tangible commodity such as bananas, but what is offered for sale is the use of a seat and access to a film. Distributors seldom sell a film print to retailers (exhibitors). They lease it, giving exhibitors the right to show the film to a market of viewers under certain specified conditions such as length of run, number of screens, advances, minimum guarantees, and dollar terms to share profit. A consumer realizes a film's value only when attending a performance. Consequently the timing of access to the performance is a key determinant of price. A newly released film generally commands a higher ticket price than a film already circulated. In addition, audiences may be willing to pay higher ticket prices for comfortable seats, air conditioning, better sound quality in the auditorium, and real buttered popcorn. The film's appeal, on the other hand, is based on the volatile taste of the audience, which carries a high risk factor. The industry has historically employed risk-reduction strategies and gimmicks such as casting the film with proven box-office stars and using special effects and wellknown stories (novels and Broadway plays). Unlike a play, which has to be staged for each performance, a movie print can be screened eternally (or until it is torn) with no significant additional cost. It can perform to various audience groups—foreign and domestic—by using various distribution technologies: broadcast television, pay television, videocassette or disc. Each of these audience groups is a significant market for potential revenues and profit. Cinema's high risk and high profits and its symbolic power attract new entrepreneurs all the time and make it a perfect candidate for big national and international capitalists. The concepts of monopoly and competition used in this study deserve some comment. Monopoly, whereby only one seller operates and determines the price of a product, is held to be a rare case by economists. Monopoly and competition are mutually exclusive according to neoclassical economic theory.37 When two or more business firms control the same market, a neoclassical economist would prefer to use the term oligopoly rather than monopoly. The essence of monopoly is control over supply, by limiting the supply of a commodity, the monopolist can set the selling price. A seller with some market power becomes a price maker rather than a price taker. For these reasons, I have used the concepts of oligopoly and monopoly interchangeably to describe the nature and behavior of the dominant firms in the Canadian motion picture industry. Neoclassical economic theory is based on the belief that capitalist economies are under a "free" market system in which a nation's re40

Introduction

sources are guided by the invisible hand of market forces. The business firm is held to be subordinate to the institution of market, and thus to the consumer. The state is subordinate to the consumercitizen, who rules it by casting a ballot. There are exceptions to this, but consumer sovereignty in the economy and in matters of state is the rule on which neoclassical economic theory is posited. In the free market system, monopoly and competition cannot coexist. The single-seller monopoly model and its opposite are sterile abstractions. The real world in most industrial economies is made up of neither perfect competition nor perfect monopoly. Neoclassical economic theory has been criticized by economics scholars for being inapplicable, because of the changed reality in the market economies of the advanced capitalist countries. In 1933, two significant critiques of neoclassical economic theory appeared: Joan Robinson's "imperfect" competition and Edward H. Chamberlin's "monopolistic" competition.38 Their contributions laid bare the existence of a condition between the polar extremes of perfect competition and perfect monopoly. They opened up the intermediate ground as an important terrain for empirical exploration. John Kenneth Galbraith, in his presidential address to the American Economic Association in 1972, argued that there were two systems operating in industrialized economies: the monopolistic sector and the competitive sector.39 Galbraith noted: "in the place of the market, we must now assume that for approximately half of all economic output there is a power or planning system. . . . The planning system consists in the United States of, at the most, 2,000 large corporations. In their operation, they have power that transcends the market."40 Galbraith explained further how this monopolistic sector influences the U.S. economy: [We] agree that the modern corporation, either by itself or in conjunction with others, has extensive influence over its prices and its major costs. Can we doubt that it goes beyond its prices and the market to persuade its customers? Or that it goes back of its costs to organize supply? Or that from its earnings or the possession of financial affiliates it seeks to control its sources of capital? Or that its persuasion of the consumer joined with the similar effort of other firms—and with the more than incidental blessing of neoclassical pedagogy—helps establish the values of the community, notably the association between well-being and the progressively increased consumption of the products of this part of the economy?41

Galbraith emphasized that in the still-evolving monopolistic sector of the economy, power extends to markets, to the people who patronize 41

Introduction

them, and to the state. The monopoly sector's priorities and needs in research and development, technically qualified people, public works, and emergency financial support become public policy. He further noted that in the competitive sector power is contained by the market.42 In the Canadian motion picture industry, one can observe the coexistence of the monopolistic and competitive sectors described by Galbraith. However, the monopolistic sector is an extension of a foreign, predominantly American monopoly power. Its power over the production, distribution, and exhibition markets in Canada is considerable. Furthermore, the power the monopolistic sector brings to bear on the Canadian state to influence government policy in the motion picture industry is critical in understanding Canada's historic dependence on the U.S. film industry. The struggle waged by the competitive sector against a foreign-controlled monopoly attempting to influence public policy deserves careful examination. This is the dialectic that historically has shaped the Canadian feature-film industry and reveals the future course that industry might take.

Sources of Data Lacking a systematic data base on the motion picture industry in Canada, obtaining reliable economic data on this industry is a difficult and time-consuming task. Statistics Canada collects information published in two annuals (63-206 and 63-207). They are useful in gaining an overall picture of the marketplace, but significant gaps exist in the data because the information is based on surveys voluntarily completed by companies. Data about ownership, investment, and profitability in the exhibition industry are not available in these annuals. Moreover, some of the data presented in the annuals is incomplete. In order to analyze market power, sources such as the annual reports of the companies, the Film Industry Year Book, and trade journals should be utilized. The various agencies of the government, such as Telefilm Canada (formerly the Canadian Film Development Corporation, or CFDC) and the Festivals Bureau, do not collect any information about ownership, control, and operations of the American majors and Canadian companies. If one needs to know patterns of income, investments in films, and profits of these corporations, one has to wait until they 42

Introduction

themselves reveal those data. The main reason for this sorry state of affairs is a lack of consumer laws requiring mandatory filing of such information with a government agency. One can learn a considerable amount about the American majors from U.S. government agencies. For example, Form 10-K reports filed with the Securities and Exchange Commission (SEC) and the Department of Commerce statistical bulletins provide a general picture of their operations. These companies treat Canada as part of the North American region for marketing purposes, making delineation of the data with respect to Canada difficult. I often had to proceed on "guesstimates" for Canadian information based on established industry standards. There is a cloud of secrecy surrounding company finances in Canada, particularly those of the dominant corporations. Other problems are misrepresentation and falsified box-office figures. Consequently, I have chosen to rely on the statements made by the company officials under oath in various court cases involving the majors and the principal theater circuits in Canada. Submissions made by the majors, the circuits, and various trade unions and associations to provincial and federal agencies on policy matters were used. Interventions made by the major exhibitors in Canada to the Royal Commission on Corporate Concentration in 1975 yielded important information, which was not in the public domain until then. Additionally, the key trade journals—Variety from New York and Cinemag/Cinema Canada from Montreal—provided current information on the industry. The Film and Video Certification Office collects specialized data regarding coproduction agreements between Canada and other countries, eligibility requirements for capital cost allowance for investors in Canadian films, and changes in the tax laws. Consumer and Corporate Affairs Canada and the Department of Communcations were good sources for specialized information. The government of Canada, however, does not make public all studies commissioned by its agencies. One such document sealed away as confidential was "Evaluation of the Canadian Film Development Corporation," a useful analysis of the CFDC in its first five years. In 1979, the secretary of state released it for academic purposes at my request. Hardly anything in it could be considered damaging to the government. By law, the records of Investment Canada (formerly the Foreign Investment Review Agency, or FIRA) are totally sealed from public scrutiny. The cloak of secrecy exists because the government fears potential embarrassment. In such cases, I have had to develop sources 43

Introduction

within the American film industry to obtain information on their investments in Canada. Material on the history of Canada's feature film industry is sparse and particularly lacking when one looks for economic data. Peter Morris's pioneering study on the early history, Embattled Shadows: A History of Canadian Cinema, 1895-1939; The Film Industry in Canada: Report; and Paul Audley's Canada's Cultural Industries: Broadcasting, Publishing, Records and Film were helpful guides.43 These, however, do not share my theoretical perspective. To corroborate the data and to collect additional information, I interviewed several key persons in Canada's feature film industry who were in a position to speak authoritatively about the different sectors of the industry (see the Bibliography). I also interviewed individuals who had retired or were about to do so, assuming that they would be more candid about industry practices. The process of gathering data from these sources was time-consuming and cumbersome. Canada needs to impose a mandatory requirement forcing companies to file certain vital information with the government. My experience has persuaded me that the Canadian Film Institute in Ottawa should be expanded to include a research library to gather systematic data on Canada's cultural industries. It should become the depository for all relevant materials on the industry from various agencies of the state, the companies, the unions, trade associations, and academic institutions. In Chapter 1, the historical foundation of Canada's dependence on foreign film imports is examined. Chapter 2 describes the activities of the American film industry cartel in Canada and the first test of antimonopoly law. Chapter 3 examines the consolidation of the American film industry's power in Canada and responses by Canadian independents. Chapter 4 looks at the reasons behind Canadian government involvement in film production and the American lobby. In Chapter 5, the tax-shelter policy and its impact on film production are examined. Chapter 6 discusses internationalization of Canadian films by way of coproductions and its benefits to Canada. Chapter 7 looks at why the Canadian government intervened in the 1980s by using the combines law and how it affected the film industry. And, finally, Chapter 8 analyzes attempts by the Canadian and Quebec governments to regulate film distribution in light of the proposed free trade treaty with the United States.

44

1. Roots of Dependency, 1906-1930 The Canadian film industry's early history and the kind of dependent film culture that has developed in Canada are tied to many complex factors. Not only was Canada bound up with its historic ties to the decaying British empire, but its entrepreneurial culture of laissez-faire capitalism was to be overwhelmed by the emerging monopoly capitalism of the United States. Canadian entrepreneurs would attempt to raise capital at the local level—small merchant capital—to produce films, set up distribution offices, and build theaters but would be swamped by the power of the combined forces of industrial and banking capital from the United States. Canada's big capitalists, though, would support ventures assuring a high degree of profit, such as franchises of leading American film producers and structural ties with the American film industry by vertical integration. All of these factors laid the foundation for dependent development in Canada, the roots of which go back to the turn of the century.

Early Years The flickering images presented in vaudeville and variety houses in the early 1900s caught the imagination of Canadian audiences just as they had done nearly all over the world. Many pioneer exhibitors went from town to town with a limited number of films and screened them until audiences became weary of them. In that era, traveling 45

Canadian Dreams and American Control

Andrew M. Holland (left) and George Holland. (From Canadian Picture Pioneers, Gold Book, no. 2; courtesy of C. R. B. Salmon). businesses had to buy pictures outright from equipment manufacturers and use them until they literally fell apart. Canada received films and equipment from all over the world. As imported films were still silent, language was not a barrier for the audience. They enjoyed the moving images from many parts of the world and their likeness to life. Edison in America, Lumiere in France, and various British manufacturers supplied equipment and films. Canadian entrepreneurs, very early on, did not innovate their own technology but were satisfied to exploit the market with imported equipment and films. Among the early pioneer exhibitors, Andrew and George Holland of Ottawa stand out for their entrepreneurship. They became the eastern agents for Edison's Kinetoscope, a "peep show" device that led to the development of projectors. The Holland brothers held the first commercial screening of moving pictures in North America at their Kinetoscope parlor on April 14, 1894, at 1155 Broadway in New York City.1 Peter Morris, in his study of jthe early years of the film industry, explained this trait of Canadian capitalism: The Holland brothers, sons of a pioneer Ottawa businessman, are paradigmatic reflections of the nineteenth century. They typify that special 46

Roots of Dependency

Victorian entrepreneurial urge which, on the one hand, was allied with significant technological advance and, on the other, with an apotheotic dedication to laissez-faire capitalism.2

While the leading manufacturers of motion picture equipment and patent holders in the United States developed integrated structures to monopolize the emerging film markets, Canadians pursued a different course. This significant characteristic of Canadian entrepreneurial culture was to set the pattern for the way Canada's film industry would be shaped in the years to come and haunts it even today. (I will return to this theme in subsequent chapters.) As producers could not supply all the film demanded by exhibitors, film rental came into practice. These became known as exchanges, later to be called distribution. Distributors rented pictures on a flatrate basis to traveling exhibitors. Canadian entrepreneurs started many of these exchanges and later obtained franchises of American, British, and other producers in order to market them in Canada. Very few would venture into film production on their own. At the same time, single-scene films were being replaced by onereelers which encouraged the establishment of permanent theaters in Canada. John Schuberg, an itinerant exhibitor from western Canada, was impressed by the first such theater built in the United States in 1902 by Thomas L. Tally in Los Angeles. Schuberg started his own permanent theater in Vancouver,3 the Electric Theatre, which opened with an American film, Mount Pelee in Eruption. Schuberg followed his first venture in film exhibition with the Dream Land and the Unique Theatre, both in Winnipeg. The latter opened with The Great Train Robbery, another American film. By 1909, small circuits were being organized all over Canada. Schuberg became the owner of a circuit of eight theaters which spread into the central United States.4 For all practical purposes, the border between Canada and the United States did not exist during those early years of the film industry; entrepreneurs from both sides of the border traveled at will. This practice was to be an important factor in the way the Canadian film industry developed. There were many entrepreneurs—both English and French—who rented stores to turn them into theaters at night. L. E. Ouimet was another pioneer who, in 1906, built the first successful permanent theater in Montreal, the Ouimetoscope.5 His theater was the forerunner of the movie theater of today. Ouimet offered two shows a day, reserved seats, and "illustrated songs," all of which were to become a normal part of the theater business in subsequent years.6 47

Canadian Dreams and American Control

The patterns of Canada's motion picture industry were established in its early days. The exhibitors and exchange owners were predominantly Canadian, but few of the films they exhibited were produced in Canada. Some of the early nickelodeon operators made their own films, which were mainly images of exotic Canadian scenery. However, Canadians predominantly viewed imported films. Theater programs typically consisted of 60 percent American films and 40 percent British and French productions, with occasional films from other foreign countries.7 Barriers to entry into exhibition and distribution of films did not exist in the early years of the Canadian film industry, as was also the case in the U.S. and British film industries. The only requisite was a small sum of capital to enter the business. Major manufacturers of motion picture equipment and films in the United States consolidated themselves into a monopoly, the Motion Picture Patents Company (1908-1915), and developed a vertical structure of control supported by big capitalists and banks.8 Canada's film industry remained open for equipment and films from outside. Thus, Canadian theater circuits became conduits for imported films.

Film Production While the United States and other countries developed a "story" film tradition, Canada produced mostly propaganda shorts sponsored by the government or the Canadian Pacific Railway (CPR). The CPR financed films in order to lure white Western European immigrants, preferably of British stock, to counter the possibility of being absorbed into the faster and more dynamic nation-state, the United States. Canada's population at the turn of the century was some six million, but by 1914 it had attracted three million new immigrants. For a country of continental proportions, it was still too small a population. Its major cities—Montreal and Toronto—had exceeded one hundred thousand people each, still small by comparison with their counterparts in the United States. The Colonization Department of CPR hired the Edison Company in New York to make a series of melodramatic one-reel films advertising Canada as a desirable alternative for American and British immigrants looking to set down roots and establish a new life-style.9 The sparse population did not deter some entrepreneurs from attempting to make feature films. Such activity was characterized by 48

Roots of Dependency

small capitalists investing in an occasional film rather than having an ongoing production activity whereby a regular supply of films was guaranteed to the exhibitors. Before World War I, four companies attempted to produce feature films in Canada. Their successes and failures have been documented elsewhere.10 The history of these companies points to some of the important problems in Canada's film industry during its infancy. Each company had difficulty finding the necessary talent and technicians to make films. The vitality of the popular arts in America was so inviting to the undiscovered Canadian actors and other talents—the Mary Pickfords, Mack Sennets, and Jack Warners—that they were emigrating to New York, Chicago, and Philadelphia, a process that still continues.11 The tremendous fluidity that existed among American theater, music, and other arts contributed enormously to the growth of a production industry in the United States. Canada lacked a theatrical, vaudevillian, and musical tradition that was common to the British and American film industries. Sources of capital for film production dried up with the failure of these companies to produce profits, as they largely depended on gaining access to distribution and exhibition markets. The film companies' ability to widely distribute and exhibit their products was hampered by the early domination of film markets by American and British films. Was there any demand for Canadian films in Canada? The antiAmerican sentiment before and during World War I gave expression to such a demand. In the federal election of 1911, when the Liberal government's policy of open trade with the United States became a national issue, Canadians expressed a desire for the production of films closely related to their own lives and backgrounds.12 This surfaced again during World War I when Canadians felt that U.S. films failed to portray their heroism in the war and in some instances insulted them by an excessive display of the Stars and Stripes. Various censorship boards established by 1911 banned films which in their view unnecessarily flaunted U.S. flags. In much of Canada, the terms Canadian and British were interchangeable in those days. Leading Canadian newspaper editorials called for domestic films to be produced supporting the war effort and extolling Canadian soldiers' bravery. The American trade paper Moving Picture World criticized the Canadians with the following remarks: "Canadian imperialists are complaining about having to witness too many deeds of Yankee valor in moving pictures. No reciprocity wanted—excepting Yankee dollars."13 As though in response to the public's demand for Canadian films, 49

TOLLING THE TRUTH in PICTURES

N defiance of "trusts" or "booking Combines,'* the ten productions herein announced, will continue to be exploited until every foreign country and a reasonable quota of theatres in the English-speaking world, hove been contracted for. I call on the eleven million Canadians oa thb North American continent to get behind ^the local exhibitors in boosting these drama* o! the Canadian Northland, They are decidedly meritorious. Some of them have been officially listed among the best pictures of the year. As a film-producing nation Canada is but three years old, having made her initial bow with "Back to God's Country" which has already earned over half a million dollars, ^ Phutf jurat now perfecting whereby each of the nine Provinces ol Canada will have its own producing unit, thus insuring a greater variety of scenic grandeur and picturesque appeal back of the drama proper, than can be found in any other Northern country, The day of camouflaged scenery has passed. Exhibitors and the public are demanding REALISM in pictures.

Ernest Shipman, "telling the truth in pictures." (Courtesy of the National Archives of Canada, MISA 2263).

Roots of Dependency

more than thirty companies were established between 1914 and 1922 to make feature films.14 Canadian National Features built Trenton Studios in Ontario and urged Canadians to invest in the company's stock on patriotic grounds.15 The Canadian public responded well; $278,000 worth of stock were subscribed to within weeks of the company's incorporation in 1916.16 But none of the companies produced films on a long-term basis; at most, they made one or two films. Many were simply stock promotion deals. One of the notable entrepreneurs of the time who had the passion and promotional skills to make features in Canada was Earnest Shipman. His first feature, Back to God's Country (1919), was directed by an American but shot in Canada and released by First National, a U.S. distributor. The film was such an enormous financial success that its Calgary financiers netted a 300 percent return.17 Shipman's further ventures in feature film production were not as successful, and they did not meet the investors' expectations. First National, by then a growing power in the U.S. film industry, was not interested in distributing his films. Unintegrated production companies such as Shipman's were either absorbed by bigger companies or squeezed out of business. Canadian producers, despite their entrepreneurial abilities, became victims of a historic development beyond their borders. For production to occur on a sustained basis, as in the American film industry, integrated companies controlling both production and distribution became a necessity. While there was a certain degree of demand for Canadian-made films, production in the absence of integrated companies was not feasible. To examine why Canadian producers could not develop integrated structures, we turn to the developments in the exhibition and distribution sectors of the Canadian film industry.

Structures and Policies in Exhibition and Distribution Events in the American and British film industries had a direct bearing on Canada. Kirwan Cox's unpublished study "The Rise and Fall of the Aliens" provides a good sketch of the evolution and development of the Allen Theatres circuit, which set the pattern for the Canadian film industry's dependent development. In less than a year after they moved to Canada in 1906, the Aliens had started storefront theaters in the Ontario cities of Kingston, Berlin (renamed Kitchener in 1916), 51

Canadian Dreams and American Control

Jule Allen. (Courtesy of the National Archives of Canada, Canadian Film Weekly, Coll. MISA 15176.) and Chatham and had also bought a large number of one-reel films.18 They also found other storefront theater owners who were eager to rent or exchange films. As a result, they began a film exchange business, the Allen Amusement Corporation, a wholly owned distributing company19 The Aliens started the process of integrating exhibition and distribution, imitating the U.S. and British film industries of the time. Before the arrival of large national exchanges, American producers sold exclusive franchises of their productions to distributors in various territories, both in the United States and in Canada. Many of these distributors were also exhibitors, assuring film producers of exclusive access to markets. This essentially was a monopoly, because the franchise holder controlled the films in a specific territory. The franchisee not only had the right to first showing of the films in its theaters, but some of its competitors in the same market were dependent on it for a portion of their supply. The Aliens acquired the exclusive rights to distribute Pathe and Independent Motion Pictures productions from the United States.20 Being part of an integrated company, their theaters were accorded first-run status and the ensu52

Roots of Dependency

ing control of part of the supply of the subsequent-run theaters in the market. This gave the Aliens a high degree of power over their competitors. The struggle between the Motion Picture Patent Company and the independent producers to control the U.S. film industry discouraged the Aliens, as they feared uncertainties in the motion picture business.21 They sold their assets in the East and were out of the film industry for a short period. But by 1910, they returned to operating theaters, this time in the booming West. Calgary, which was growing rapidly, attracted the Aliens. They started the Canadian Film Exchange with Independent Motion Pictures in the United States as the source of supply.22 They prospered quickly. The only theater operating in Calgary was the Empress, part of a fifteen-theater circuit in western Canada owned by a Winnipeg company. The Aliens challenged the circuit by building the Monarch, a 600-seat theater. They built their second Calgary theater by 1913, calling it the Allen Theatre. It was a lavish picture palace with a balcony and an organ. Building large theaters with extravagant architecture was a proven tactic to beat competition in those days. The Aliens combined good showbiz glamor with sound business practices. The product was not necessarily a high-quality movie but a high-quality theater. Because some conservative Canadians criticized motion pictures as a bad influence on people's morals, the Aliens believed a high-quality theater might draw a respectable audience, elevating the medium and increasing the chances of the upper classes accepting it. More importantly, a large-capacity theater with lavish architecture became more desirable to the distributors because of its audiencedrawing power. A theater with first-run status would automatically cut into the business of competing theaters, reducing them to second-run status. As a result, exhibitors competed with each other to build better theaters, as the right to the first showing of a film ensured greater earnings at the box office. One researcher found that first-run theaters in the United States provided well over 50 percent of the total rental revenue and, in some areas, as much as 80 percent.23 By 1915, the Aliens' distribution arm expanded nationally. Their success was based on the exclusive franchises they had secured from the New York producers. Paramount Pictures had been organized as a buying combine in the United States to distribute productions from Zukor, Lasky, and other independents. The Aliens feared that Carl Laemmle, previously the source of their films, could not offer them as attractive a supply of films as Paramount Pictures. They bought the 53

Canadian Dreams and American Control

Paramount franchise for Canada, calling it Famous Players Film Service Limited.24 By 1915, Toronto had developed into the largest market for movies in Canada. It had twice as many cinemas as Montreal and the largest moviegoing public in the country. The Aliens decided to move to Toronto, but since they had sold all their theaters in the East earlier, they had to begin anew. Their nine theaters in the West were consolidated with their distribution firm, Canadian Paramount Pictures Corporation Limited. World War I had a substantial impact on the flow of pictures into Canada. Imperial patriotism was evident, particularly in Ontario, which had a concentration of Orange loyalists who believed in God and king. The American government was neutral in the war until it was nearly over. Many patriotic patrons and exhibitors in Canada expressed concern about the overwhelming presence of American films in Canada, which did not support the war effort. The Aliens responded by hiring an agent in England to buy British pictures for distribution in Canada.25 One of the better films to reach Canada through this process was Bruce Bairnsfather's Better 'Ole, a comedy that played in the Tivoli Theatre in Toronto for sixteen weeks, probably a record for any feature-length film from any source at that time. Many exhibitors, loyal to the British empire, tried to expand the market for British pictures by special promotions such as all-British film weeks. These film weeks were organized in England to help the British production industry, which was in a crisis because of its inability to compete with American companies. The promotions failed in Canada and in Britain. The response of exhibitors in Canada to the patriotic fervor was typically colonial in that they made no attempt to invest in indigenous production of films. The Canadian government intervened in the motion picture industry during World War I because it realized that war propaganda films would not receive significant distribution if left entirely to the companies involved in the distribution and exhibition of films. In 1917, W. J. Hanna, the government's food controller, announced the formation of the Motion Picture Committee of the Food Controller and issued the following statement: Realizing the possibilities of the motion picture theatre as an influence in almost every Canadian community, I have authorized the formation of a Motion Picture Committee to organize the educational work of the Food Controller's Office for the screen. 54

Roots of Dependency

This Committee consists of one representative from my office and leading representatives from the motion picture industry in Canada— Messrs. Jule and Jay J. Allen and Mr. Claire Hague [Canadian General Manager, Universal Pictures Corporation], who have patriotically volunteered their services. I count on the patriotic spirit of Canadian exhibitors in asking them to cooperate with these gentlemen towards giving the greatest possible publicity to the special films and slides produced for the information of the public on the important war measure of Food Control.26

The films in this government-sponsored program were distributed free of charge and drew large audiences. Many of them, however, came from Britain. One such film, War Gardens (1918), encouraged Canadians to cultivate backyard gardens. Other government departrnents also sponsored films to exhort Canadians to support the war effort. Notable was the Dominion Victory Loan Committee which sponsored several films to encourage Canadians to buy war bonds. Most of the films were, however, produced in the United States by Famous Players—Lasky Company. Big stars such as Mary Pickford, Douglas Fairbanks, and Charlie Chaplin were featured in these films, but they were adaptations of America's Liberty Loan films.27 Among the productions exclusively shot in Canada were newsreels. As there was a definite need for such films domestically and in the war front where thousands of Canadian soldiers were engaged, their producers thrived for a while. The most innovative among them appears to have been L. E. Ouimet. His company, Speciality Film Import, had rights to the British Pathe newsreel, and Ouimet combined international newsreel material with domestic footage shot by his own photographers stationed in various Canadian cities. It was such a success that it was seen twice weekly by 1.5 million Canadians. The U.S. newsreel producers such as Fox Canadian News soon copied Ouimet's innovation whereby they combined original American material with Canadian additions. As would be expected, Ouimet's company folded, and the American newsreels controlled the entire newsreel market. An industry newspaper lamented in 1919 that theaters were not booking Canadian films and urged them to do so in the interest of developing a feature film industry in the dominion: Get behind Canadian Product—find a place for it on your program, and feature it in your advertising. The public is looking for Canadian pictures, but it devolves upon the exhibitors of the country to book the releases. The weeklies of Specialty, the scenics and industrials released 55

Canadian Dreams and American Control

by Universal, the Ford Canadian Monthly and the Ontario Government Films distributed by Regal all attain a higher quality, both for subject matter and photography, than any releases ever imported from the United States. Book all of these releases and give the Canadian producers an incentive to widen the field of their endeavors and make real 28 features in the Dominion.

The Canadian government's mobilization of the distribution and exhibition sectors of the film industry on a voluntary basis was characteristic of its intervention in the motion picture market. The war reduced film production in Britain significantly, resulting in Canada becoming more dependent on American films. As Paramount's position became preeminent in the United States,29 the Aliens, having the exclusive franchise for Paramount films, amassed more wealth, which they invested in extravagant picture houses. They purchased old theaters and remodeled them in exotic and elegant architectural style. The Temple in Edmonton, cost $150,000 to renovate, and seated 1,600 patrons. The Allen Theatre in Winnipeg was budgeted $500,000 for refurbishment. By 1920, the Aliens operated the largest theater chain in Canada, with forty-five theaters. They planned to build the world's largest theater chain. The Aliens began their expansion into the United States by building a 3,000-seat-capacity theater in Cleveland.30 An Allenowned theater in Detroit seated 3,500 and was the largest in the world when it opened.

Vertical Integration with the U.S. Film Industry The Aliens had powerful rivals in Canada. The growing popularity of motion picture entertainment around the world resulted in high profits for the leading American producers and distributors, who had decided to expand their operations internationally by 1920. Vertical structures based in production—First National and Paramount Famous-Lasky— were competing fiercely to control the box office. Paramount positioned itself to directly own theaters in order to retain a dominant position in the market. These developments in the United States had profound significance for the growing Canadian motion picture industry. As Paramount's president Adolph Zukor contemplated buying large theaters in the United States, he cast his eyes on Canada's largest theater chain, owned by the Aliens.31 The Aliens not only refused 56

Roots of Dependency

N. L. Nathanson. (From Canadian Picture Pioneers, Gold Book, no. 2; courtesy of C. R. B. Salmon.) Zukor's offer for a fifty-fifty partnership in 1916, but they apparently bragged about it to a friend and neighbor, Nathan L. Nathanson, who operated a theater in the Toronto area.32 Nathanson then went to New York to persuade Zukor to grant him the Paramount franchise, then held by the Aliens, which was up for renewal in 1919. Nathanson apparently suggested to Zukor that he should build a theater chain rivaling that of the Aliens. Zukor in turn asked Nathanson to build a small theater circuit and prove that he was capable of running one, after which Zuker would consider giving Nathanson the Paramount franchise. Nathanson subsequently formed the Regent Theatre Company in 1916 with capital from a coterie of three Toronto investors—J. P. Bickell, J. B. Tudhope, and W. J. Sheppard. By 1919, Nathanson started Regal Films Limited, headed by Bickell and with Nathanson as managing director. Regal Films acquired exclusive franchises for the films of Select, Triangle, and Metro, all American film production companies. The Regent Theatre Company grew to a sixteen-theater circuit.33 Nathanson incorporated another company, Famous Players Canadian Corporation Limited, on January 23, 1920. It controlled eleven motion picture theaters in Ontario and two in British Columbia, with a total seating capacity of 15,000.34 These initiatives convinced Zukor to enter into partnership with the Nathanson group. An agreement was signed by Paramount Famous57

Canadian Dreams and American Control

Adolph Zukor, president of Paramount Pictures. (Courtesy of the Museum of Modern Art/Film Stills Archive.) Lasky and Nathanson's new company, Famous Players Canadian Corporation, on February 5, 1920, granting the latter corporation exclusive rights to exhibit Famous-Lasky pictures in Canada for a period of twenty years.35 It was an equal partnership; Zukor became the first president of the Canadian company, and Nathanson became its managing director. This was to prove an important avenue for Famous-Lasky in obtaining monopoly power over the Canadian theatrical market. Vertical integration of the three principal sectors of the motion picture industry—production, distribution, and exhibition—had started in the U.S. film industry and was extended into Canada between 1920 and 1930 as if there were no borders between the two countries. Indirect control of the Canadian market had been established by major American production and distribution companies prior to 1920 by the exclusive franchise agreements with Canadian exhibitors. The British film industry had been in a similar situation until 1927, when the British government intervened to preserve the British film industry 58

Roots of Dependency

and the presence of British films all over the empire.36 In Canada, however, the direct ownership of a theater circuit by a leading American film production company further entrenched American films on Canadian screens. By 1925, five years after vertical integration with an American major film corporation began, 95 percent of all films exhibited in Canada were supplied by major U.S. film companies. Canada provided 5 percent of total world film market revenue for Hollywood.37 Integration with major American companies lessened competition from rival producers, distributors, and exhibitors in the Canadian film industry. The foundation of the Allen Theatre Circuit had been the continuing supply of films from Zukor's company. With the formation of the Famous Players Canadian Corporation, the Allen empire was on shaky ground. Lord Beaverbrook, who had purchased an interest in Gaumont-British, one of the largest theater circuits in England, expressed an interest in the Allen holdings, offering $5 million for a 50 percent partnership. Two of the largest investors in the Allen company, First National and the Bank of Commerce, turned down the Beaverbrook offer.38 It is hard to determine if the Aliens could have survived a little longer if they had received financial support from Britain and if more British pictures had been released in Canada. British film production was itself a victim of American monopoly control at that time. After losing the Paramount franchise, the Aliens aligned themselves with First National, a vertically integrated company in the United States.39 This reprieve was short-lived; the chain survived just three years of competition with Nathanson. Prime position in the first-run portion of the exhibition market rested on newer, bigger, and more comfortable theaters. Nathanson, therefore, announced plans to build twenty new theaters in 1920. The Aliens had used this formula earlier against the smaller independents and had succeeded. By 1921, New York's Moving Picture World described the Canadian market situation: The Aliens are operating 55 theatres in 30 cities in Canada. There is practically direct competition between Famous Players Canadian Corp. and the Aliens all along the line from Vancouver to the Atlantic coast. The Aliens build their theatres with the aid of local capital, shares being floated as popular investments, while Nathanson's company has been backed by capitalists. Famous Players has had a strenuous building campaign with new "Capitol Theatres" opened in Montreal, Ottawa, Winnipeg, Regina, Calgary, Vancouver, and other houses at Oshawa, Sault Ste. Marie, and Peterboro [sic]. 59

Canadian Dreams and American Control

Canada has less than 1,000 theatres, but the country has been a battle ground for two competing organizations whose holdings rival the theatre chains in the U.S. or Great Britain.4

The crux of the matter lay, as is hinted above, in the fact that Nathanson was backed by international monopoly capital, which could overpower the Aliens' merchant capital. The international capital also had allies among Canada's big capitalists. When the Aliens decided to reorganize their companies after the break with Zukor in 1920, they tried to raise $5 million through preferred shares, but they failed.41 The underwriting was handled by the Winnipeg firm of Edward Brown and Company, while the prestigious Montreal-based Royal Securities Corporation Limited handled Nathanson's underwriting. Canada's big capitalists, like their counterparts on Wall Street, were attracted to the real estate end of the motion picture industry rather than the creative end, where risks were rarely under control. They also understood the importance of the franchise agreement with Zukor. I. W. Killam, president of the Royal Securities Corporation, admitted that the foundation of the original financing of Famous Players Canadian Corporation was the Paramount franchise. Killam, a member of the Famous Players board of directors, stated that the franchise was "essential to assure the stability of the investment of the large amount of money being spent on theatres."42 In the banking world, security of investment was more important than who controlled the company or which movies played on the screens. Famous Players Canadian Corporation was soon to lose any control it might have possessed. The partnership between Zukor and Nathanson lasted until August 30, 1930, when the exchange of four shares of Paramount stock for five shares of Famous Players Canadian Corporation secured Zukor 93.8 percent of the total issued shares of the Canadian company.43 Subsequently, a three-person voting trust was established, consisting of Zukor, Nathanson, and Killam. Ostensibly the object of the pooling of the shares was to give the public the impression that Famous Players Canadian Corporation was a Canadiancontrolled company inasmuch as two of the voting trustees were Canadian and the pool had share control of the company. Greenshields and Company, which sold the shares, issued the following statement: Control of the Company is being assured to Canada through the purchase of common stock previously held by American interests. For the purpose of retaining this control and providing continuity of the present successful management, voting control has been placed for a period 60

Roots of Dependency

of ten years in the hands of three trustees under a deposit agreement in favor of the Montreal Trust Company. 44

This circular may have been issued to induce the Canadian public to buy Famous Players Canadian Corporation's shares. On the other hand, there may have been pressure from some stockholders to ensure that control of the company remained in Canadian hands. Speculation aside, the real object of the trust was to protect Famous—Lasky, in light of the franchise agreement which gave the American corporation control of the Canadian market on a long-term basis.

Rise of Famous Players Canadian Corporation Famous Players Canadian Corporation (Famous Players), under the leadership of Zukor and Nathanson, employed a number of strategies in their attempt to dominate Canada's film industry. Understanding these methods explains why the Canadian independent exhibitors challenged the structure of domination in later years. Armed with the most lucrative franchise of the day (Paramount films) and backed by big national and international capitalists, Famous Players expanded rapidly. The new company pursued independent exhibitors with a vengeance unsurpassed in Canadian motion picture history. Famous Players had its own "wrecking crew" and a "dynamite gang" to help achieve its goal of monopolizing the Canadian theater business, just as its parent company in the United States had. When an independent refused to sell or cooperate with Nathanson, his associates would go to the extent of putting pressure on the landlord of the exhibitor to sue the lessee for unpaid rent. This was a false charge, but it created a significant amount of trouble for a small entrepreneur. On one occasion a stink bomb exploded in a competitor's theater. It was placed there by an employee of B & F Theatres, a subsidiary of Famous Players.45 Nathanson's other predatory tactics to wipe out competition included lowering admission prices and forbidding vaudeville artists who worked for Famous Players' companies to perform in his opponents' theaters. Nathanson, however, did not employ similar tactics against his major competitors, the Aliens, because his wait-and-see strategy succeeded in their case. The Allen empire collapsed from within. The Aliens were in a strong financial position in 1920, with total earnings for the previous calendar year of $459,154.46 However, they needed more capital to 61

Canadian Dreams and American Control

meet their construction plans for new theaters, to which they had already committed funds. Famous Players was beginning to drain their profits as they had exclusive rights to the more popular Paramount films, although the Aliens held Select, Goldwyn, and First National franchises. Several external and internal forces bankrupted the Aliens over the next three years. They attempted to reorganize all of their concerns under a new holding company in 1920, which was capitalized at $5 million in preferred shares offered to the public. It was the same method Famous Players had successfully employed in generating capital for its expansion, but the financing efforts of the Aliens failed.47 They were not a subsidiary of a large American corporation, and they lacked prominent Canadian financiers on their board, unlike the Famous Players Canadian Corporation. To compound the problem, a short but severe depression plagued Canada in 1921, reducing the box-office revenue, the only source of income for the Aliens. Economic conditions in the country further worsened in 1922. Jay Allen, who was known for taking risks, invested a large sum of money in the German mark from liquid assets required for their creditors.48 The value of the mark plummeted, and bankruptcy was inevitable. The Empire Palace of London sued the Aliens for breach of contract over the purchase of the theater site when they could not meet the payments. The lawsuit was reported in the trade press, generating more problems for the Aliens. Major creditors included the Simpsons, the Canadian Bank of Commerce, the federal Department of Finance, and First National Pictures in the United States.49 Since First National was competing with Paramount in the United States, a collapse by the Aliens would have cost First National the sizable Canadian market for their pictures. First National responded with a loan offer of $100,000 to keep the Aliens afloat and asked other creditors to make proportionate advances. It seemed as though the Aliens were going to survive the crisis. But in April 1923, G. T. Clarkson Company, the authorized trustee of the Aliens for the benefit of their creditors, declared the Allen Theatres Limited bankrupt and asked for tenders. Reasons for the decision are still unknown. First National's president, Robert Leiber, traveled to Toronto to make a bid for the Allen theaters, but the Famous Players' bid was accepted. Thus, in June 1923, twenty of the largest Allen theaters passed into Nathanson's hands. The Allen film exchange business closed, and their franchises were acquired by Regal films, a subsidiary of Paramount.50 The collapse of the Aliens was clearly indicative 62

Roots of Dependency

The front gate of Paramount Pictures studios. (Courtesy of the Museum of Modern Art/Film Stills Archive.) of the weakness of local merchant capital supporting them. It could not withstand the combined onslaught of indigenous big capital and international capital. Famous Players expanded by employing acquisition tactics that minimized competition in Canada's exhibition sector. Famous Players drew its strength from two sources: the enormous capital it could command that could not be matched by any independent at the time and the monopoly franchise that secured the choice of first-run Paramount pictures and other companies' productions. Famous Players utilized this power to become the dominant theater circuit in Canada. A complex network of companies—some fully owned and some partly owned by Famous Players—was set up to bring independents under their control. In September 1924, a new company, United Amusements Corporation Limited, was created by an agreement between United Amusements Limited, Independent Amusements Limited, and Famous Players. As a result of this agreement, seventeen theaters in Quebec entered the Famous Players network. In exchange, 63

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Famous Players gave the new company the benefit of its franchise agreement with Paramount Famous—Lasky Corporation.51 Famous Players brought several independent exhibitors into partnership with them to reduce competition in certain markets. Once a company became a partner, the agreement stipulated that the company would stop competing with Famous Players. For example, Loew's Theatre in Montreal, owned by an independent, was in financial difficulty in the fall of 1922. Famous Players loaned it $100,000 and reorganized the company under the name of Mansfield Theatre Company Limited. The reorganization effectively placed control of the new company under Famous Players by an agreement not to compete with the corporate owner. Its headquarters were moved to the Famous Players' offices, which received a booking fee of one hundred dollars per week during the twenty-year life of the agreement.52 In this way, Famous Players ensured that the terms of the agreement were met fully and made additional revenue in booking fees. When Famous Players began operations in 1920, they controlled twenty theaters. By October 1924, the circuit consisted of seventy theaters across the country, making it the largest chain in Canada at the time.53 It had already assumed such a dominant position in the Canadian industry that Sidney S. Cohen, chair of the Motion Picture Theater Owners of America, warned independent business owners: to exercise eternal vigilance against any such deplorable state of affairs as exists in our fair neighbor to the north—Canada. One man there controls the distributing rights to the product of every so-called "big company" in addition to theatres in any number of key spots. The predicament of the independent producers and distributors is fraught with danger.54

Cohen correctly pointed out what was to become a major problem with competition in Canadian theatrical film markets. He, however, missed the critical aspect of that control. At the time, Famous Players was vertically integrated with an American major film company as a subsidiary corporation. Another facet of Famous Players' acquisition of small theater chains was the reduction of independent entrepreneurs to mere managers under the supervision of Famous Players. A cautionary example can be found in the reorganization of B & F Theatres Limited. The charter and bylaws of the reorganized company provided that the company's affairs were to be managed by four directors—the president and secretary-treasurer (nominees of Famous Players) and the 64

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vice-president and managing director (nominees of Bloom and Fine, the original partners in B & F Theatres). The head office was moved to the Famous Players headquarters, and the books and records were also to be controlled by Famous Players. The agreement further provided that Bloom and Fine were to be employed by the new company, and they agreed not to compete for a period of ten years in any capacity or to be otherwise engaged in the motion picture business in Toronto.55 Bloom and Fine were to book and select pictures and other entertainments, but they could not "contract for pictures or other entertainments of any kind without the approval in writing of Famous Players."56 Bloom and Fine were later utilized by Famous Players to intimidate independent exhibitors who were reluctant to join the company.57 Thus, Bloom and Fine became defenders of Famous Players' monopoly power. Expansion tactics employed by Famous Players included the use of pooling agreements, whereby the receipts and expenses of two or more theaters were pooled, with profits or losses divided between the parties. The independents were persuaded to pool their theaters with Famous Players by guaranteeing them a steady supply of Paramount films as well as those of other distributors, often at prices lower than the independent would otherwise pay. This tactic was used in markets where an independent theater competed with Famous Players, thus lessening competition. In 1926, three theaters in Nanaimo, British Columbia, operated by W. P. Dewees (who was exhibiting First National's pictures), were pooled with B.C. Paramount Theatres Limited, a wholly owned subsidiary of Famous Players. One of Dewees's theaters was immediately closed down. According to the pooling agreement, "It is the intention that henceforth, so far as regards theatrical operations in the city of Nanaimo, the Paramount Company and Dewees shall cease to be in competition."58 The same fate awaited the Gem in Nelson, B.C. Under a similar pooling agreement, Royal Victoria, another Dewees theater located in Victoria, ceased to be a motion picture theater. It was rented for road shows and other purposes.59 As a result, Famous Players owned the only two first-run houses in Victoria, the Capitol and the Dominion, which gave the company total control of the market. When pooling agreements with competing theaters did not materialize, Famous Players would resort to other methods of bringing pressure on owners. One victim was Joseph Frances Langer, who owned six theaters in Vancouver and was planning to build another in the downtown area. The correspondence between Nathanson and his 65

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associates in Vancouver about Langer reveals the power that was vested in Famous Players. In a letter dated August 23, 1926, to J. R. Muir, managing director and secretary of B.C. Paramount Theatres, Nathanson wrote, "I am still concerned about the Langer situation. However, no doubt he will make a substantial investment in the Orpheum Theatre and that might keep him from going any further. It is a situation that should never have been permitted to happen and never would have happened any place in the East." The last sentence is particularly revealing. On September 13, 1926, Nathanson wrote to Muir again: Perhaps there may be some way of bringing Langer around so he will do business with us and that would be preferable to building another theatre in opposition. If, however, we cannot get together with him and he should build in Nanaimo or Nelson or some other place, it would not make a great deal of difference, because we would have to stop him sooner or later. . . . You must realize that my main reason for building in opposition to the Grandview is that I think it is the only profitable theatre he will have and once he realizes what our opposition means he will be more willing to work with us.

Subsequent to these threats, Langer decided to lease his theaters to Famous Players. Nathanson's telegram on January 19, 1927, congratulated his employees in Vancouver: "This is a good job regardless of whether the theatres are profitable or not, as Langer situation was not a good one for us." On February 1, 1927, Nathanson sent another telegram, the intent of which seems to be to run the Langer Theatres at a loss. It said in part, "If you think advisable to buy pictures on a 15 percent basis for suburban circuit, do so. Use your own judgement. What we want to do is to cut Langer film rental at least one-third."60 In less than three years, the Langer circuit operated by Famous Players was in the red, as is indicated by the testimony of T. J. Bragg, secretary-treasurer of Famous Players: Instead of bringing a profit of $25,000 per year (as prophesied by Thomas), the first year we operated that circuit we lost $5,163 and the second year, which was the first year of sound and the best theatre year, out of the six houses we made $2,600. The third year we lost $25,679.18, i.e., the year ending August 30, 1930, the total loss up to that time being $28,196.70.61

After hearing the testimony, Commissioner White concluded, "The real object in making the deal appears to have been to get rid of the competition from Langer's theatres." 66

Roots of Dependency

Control of Distribution By establishing control over the Canadian exhibition market, Paramount virtually controlled the distribution market as well. There were ten distributors of considerable size operating in Canada by 1930, all of them U.S. corporations or their subsidiaries. There were a few smaller exchanges, such as Excellent Film Exchange, which sold short subjects produced by independent producers in the United States. No Canadian-owned companies independent of affiliation with a foreign producer seem to have been operating in the years from 1920 to 1930. Following are brief descriptions of the ten largest distributors, their ownership, their relationship with Famous Players, and the source of their product. Famous-Lasky Film Service was a wholly owned subsidiary of Canadian Paramount Corporation, of which seven-eighths of the shares were owned by the Paramount Publix Corporation in the United States. Famous-Lasky Film Service distributed the pictures produced by Paramount Publix Corporation, whose parent company was Paramount Pictures. Regal Films Limited was also a wholly owned subsidiary of Canadian Paramount Corporation. Regal distributed the productions of MetroGoldwyn-Mayer Pictures and Pathe and also those of British International Films. Regal was managed by Henry L. Nathanson, brother of N. L. Nathanson, who was the managing director of Famous Players. Henry followed instructions from his brother with respect to handling the independent exhibitors. R.K.O. Distributing Corporation of Canada Limited distributed films of Radio-Keith-Orpheum Corporation, another vertically integrated company in the United States. Fox Film Corporation Limited distributed pictures produced by Fox Film Corporation, another vertically integrated American company. Vitagraph Limited released pictures in Canada from First National Pictures, Warner Brothers Pictures, and Vitagraph—all American corporations. Warner Brothers had risen to prominence with a successful venture in talkies. First National and Warner Brothers were major vertically integrated firms, and Vitagraph was an independent producer in the United States. Canadian Educational Films Company Limited distributed the productions of Educational Films Incorporated and Son-Art Productions, both American companies. 67

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Canadian Universal Film Company Limited, a Universal Pictures Corporation subsidiary, distributed their products in Canada. Universal had fought and survived the Motion Picture Patent Company monopoly in the early 1900s but had difficulty in gaining access to the first-run market in the United States, which was controlled by the five vertically integrated major companies. United Artists Corporation Limited was a subsidiary of a U.S. corporation with the same name. United Artists was principally owned by Charlie Chaplin, Mary Pickford, and Douglas Fairbanks, Sr. It was a producerdistributor combine and did not own any theaters. It distributed pictures made by the principal owners and other independent producers in the United States and other markets. Columbia Pictures of Canada Limited was a subsidiary of the U.S. based Columbia Pictures Corporation and distributed its productions in Canada. It was a newcomer to the motion picture business and an independent producer-distributor at the time. It allocated its first-run films to Famous Players. Tiffany Productions Limited distributed the product of Tiffany Productions, an American firm, through Canadian Universal Film Company. This distributor, also through the Canadian Universal Film Company, handled the products of Gaumont-British Corporation and Gainsborough Productions. Gaumont was a vertically integrated corporation, and Gainsborough was an independent production company in Britain.62 The major distributors of the day in Canada were subsidiaries of foreign corporations, predominantly corporations based in the United States. They were unifed under a trade association to operate as a cartel (see Chapter 2). All the companies supplied films primarily from their own parent companies. But with a few exceptions, they did not invest or acquire independently produced films made in Canada at the time. Some of these companies were independent production and distribution firms in the United States. Although they were sympathetic to the uncompetitive situation faced by independent exhibitors in Canada, they supplied the exhibitors only those films that Famous Players and its affiliates chose not to use. They also cooperated with Famous Players between 1920 and 1930 in many other ways to lessen competition in the exhibition market. The distribution and exhibition markets in Canada were monopolized by American companies in general and Famous—Lasky in particular. In the 1930—31 season, a total of 462 new films were proposed for release by fourteen distributors in Canada.63 Two of them were British 68

Roots of Dependency

companies that supplied a total of 40 films, or 8.7 percent of the season's total. The rest of the films, 422 or 91.3 percent of the total, were supplied by twelve American companies. Famous-Lasky proposed to release 74 films (16 percent of the total supply) in its own right and an additional 92 pictures (20 percent) through its subsidiary Regal Films. Famous-Lasky thus commanded 36 percent of all films distributed in Canada in 1930-31. Famous-Lasky was able to manage the market to its advantage primarily because of its control of Famous Players, which had acquired a formidable purchasing power in the Canadian market. This power is well illustrated by the following letter from Clair Hague, general manager of Universal Films in Canada, to Universal's head office in New York: I am attaching herewith a very interesting set of sheets giving a comparison of the Nathanson houses in the different situations, and the oppositions in the same zones or towns, also including opposition houses that are not first-run but second-run in the same zone. . . . Toronto—The Allen circuit which, while they are not a part of the Nathanson circuit, nevertheless they are pooled with Nathanson in several of their houses. In Ontario you will note that there are only ten towns of 5,000 and over where Nathanson is not in at the present time. Montreal—I have listed only the towns of 10,000 and over, due to the fact that towns under 10,000 cannot be guaged according to population, as a town of 7 or 8,000 in Quebec is really no better than a town of 3 or 4,000 in any other territory, so far as the percentage of theatre-going public is concerned. St. John—You will note that I have included the Imperial Theatre, which is a Keith house. There is an amalgamation on at the present time between the Keith-Orpheum circuit of Canada and Nathanson. You will notice that there are twelve towns of 5,000 and over where Nathanson is not in, but before Fall several of these towns will be invaded by Nathanson, as they are just going into the territory. In fact, an exhibitor is in town now and I presume that something will be worked out where Nathanson will operate or take over their theatre. I also understand that they are now trying to negotiate with the Spencer circuit in that territory. Winnipeg—You will notice in the city of Winnipeg, Morton and Kershaw houses. Kershaw houses are now over with Nathanson, and the Morton houses will be over in a short space of time. (Four Morton houses were acquired 17th April, 1929.) There are only four towns in the Winnipeg territory of 5,000 and over where Nathanson is not in. [The Winnipeg territory included Manitoba and a large portion of Saskatchewan.] Calgary—There is only one town over 5,000 [Medicine Hat] where 69

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Nathanson is not in. [This territory included Alberta and part of Saskatchewan.] Vancouver—You will note "Dewees" after some of the theatres. This is the Dewees-Nathanson combination, and on the houses marked "Berry"—this is just a recent affiliation of the Berry circuit with Nathanson. There are no towns in Vancouver [sic, he meant British Columbia] of 5,000 and over that Nathanson is not in. This will give you the situation in Canada as pertains to the Nathanson circuit.

With Famous Players holding such an important position in the main population centers of Canada, no distributor could afford to alienate the company. Famous Players sought distributors' cooperation in squeezing out the independents by advising them to consult with Famous Players before making any pictures available to its competitors. Although such tactics amounted to intimidation, the distributors acted as a cartel and cooperated with Famous Players for mutual benefit. A letter from Clarence Robson of Famous Players to J. P. O'Loghlin, general manager of the Fox Film Corporation, demonstrates the power and influence Famous Players had with the distributors: "Dear Jim, I understand that in the near future a change of the picture situation may be developing in the West Toronto Zone, and before you dispose of any of your product whatsoever in that zone I wish that you would personally take up the matter with me."65 This letter was written regarding the Crystal Theatre, which was owned by an independent exhibitor in Toronto, Ben Freedman, and operated in opposition to two Famous Players theaters in the area. Freedman's testimony illustrates the predicament faced by many independents who were in opposition to Famous Players at the time: My experience of getting pictures was a very, very difficult one—one of the worst that I knew of at that time. I went to the various exchanges to get pictures and there wasn't anybody that had any pictures available for me with the exception of F.B.O., which is now called R.K.O. I bought their program; I think at that time it was about sixty pictures they had— I couldn't get any other pictures at all—this was in June, 1927.66

F.B.O. was a minor American production company that had difficulty finding access to the American first-run market controlled by the vertically integrated major companies until R.C.A. acquired it to form a new vertical monopoly called R.K.O. The system of control established by Famous-Lasky and other vertical monopoly firms in Canada was detrimental not only to the competing 70

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Carl Laemmle, president of Universal Films. (Courtesy of the Museum of Modern Art/Film Stills Archive.) independent exhibitors but also to the independent U.S. distributors. The independent distributors had no choice but to follow the monoplistic policies of the leading production firms that dominated the U.S. and Canadian film markets. J. C. Brady, who operated the Madison Theatre in Toronto in opposition to Famous Players, found it difficult to get a supply of pictures and wrote to Carl Laemmle, president of Universal Pictures in the United States. Laemmle's reply clearly demonstrates that the distributors had no other avenue to reach the audience efficiently except by dealing with Famous Players: I am going to show you how exactly I am fixed in Canada, and, for that matter, in many territories. In the first place, Nathanson [Famous Players] controls most of the representative first-run theatres in the big cities in Canada. Now, if I don't get my pictures, or at least some of them, shown in the key cities, my salesmen find it practically impossible to sell them in other places. In other words, I am more or less at Nathanson's mercy. By nature I am an independent. My whole history in this business proves it. But there is nothing to be gained by deliberately shutting myself out of the big cities. In fact, there is everything to lose. The 71

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theatres which are really independent may be strong enough to make me independent of Nathanson, but they scatter their support in such a way that I can't live on it alone. When my salesmen go in to get bookings for Universal Pictures they find, in a vast number of independent theatres, that such theatres are booked up solidly with pictures made by the very companies which give Nathanson much of his strength. They are sorry but they can't give us all the bookings they would like to. If I could get bookings enough to support me; if the independent theatres were substantially represented in the key cities which are now controlled by Nathanson, I would take quite a different stand. But there is no sense in butting my head against a stone wall. I can't build enough theatres in key cities to lick Nathanson. That is not my job. It is the independent theatre's job. If I cannot tackle it, I have simply got to straddle the situation. If I have sized it up wrong, there is nothing I would appreciate more than a plan from you that will prove feasible and good for you as well as for me.67

By 1929, Famous Players Canadian Corporation was clearly the dominant company in Canada's motion picture business. In 1931, United Artists conducted an analysis of the Canadian theatrical market and found that 67 percent of the rental revenues came from nineteen theaters in the main cities and the rest came from all other small theaters in the Dominion of Canada.68 Large-capacity theaters located in urban centers of Canada, which had the first-run pictures on an exclusive basis, were the biggest revenue producers. In Canada, as in the United States, economic control in the motion picture industry rested with companies that controlled the first-run markets. FamousLasky had established full control over the Canadian market through Famous Players by the network of relations described in this chapter. Its competitors \ in the United States had to cooperate with FamousLasky's policies and preferences in Canada. Under such market conditions, managed by one monolithic company, the self-interest of distributors in survival resulted in their skewed relationship favoring the dominant company, Famous Players. Throughout the 1920s, most of the distributors were engaged in discriminatory pricing of film rental terms and in booking practices that were detrimental to the independent exhibitors. Generally speaking, the independents were charged a flat rental on films, whereas Famous Players and their affiliated houses were allowed to pay a percentage of the box-office gross. A letter dated May 7, 1929, from H. L. Nathanson, manager of Regal Films Limited, to K. M. Leach of the Standard Theatre, Calgary, attests to that fact: "There are no such 72

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terms as 15 percent for any independent house in Canada, and the 15 percent arrangement is made by the Producers with the Famous Players 100 percent owned Theatres, or with their affiliations."69 Why was this pricing discriminatory? The question can be answered by examining the case of two competing theaters located on the same street in Toronto. The Carlton was owned by an independent and the Parliament by Famous Players. The features shown at the Carlton during the five-week period of January 10 through February 13, 1929, came from United Artists, First National, Columbia, Tiffany, and Regal Films. The features shown at the Parliament were supplied by FamousLasky, Columbia, Regal films, Vita graph, and Universal. During this period, the Carlton paid a total rental of $2,107 to its distributors, whereas the Parliament paid a total rental of $1,560.99 to its distributors.70 The independent exhibitor paid about 26 percent more in film rental than the Famous Players theater. It is difficult to compare rental terms because they depend on factors such as type of film and theater. It is important to note, however, that Famous Players was charged on a percentage basis, which amounted to a smaller rental fee. On the other hand, most independents were charged on a flat rental basis which contributed to higher rental charges. Moreover, flat rental fees had to be paid in advance of the showing of a film; percentage fees allowed Famous Players to settle the account later while earning interest on their money.71 The independent was at a further disadvantage because to cover costs it had to charge a higher admission price than a Famous Players theater. Moreover, the independent could only make two program changes a week throughout the period, and it was not covered by a protection policy, as was the case at Famous Players.72 Some distributors reluctantly gave in to the demands made by Famous Players. Once an independently owned theater came under the Famous Players umbrella, that company demanded special treatment by the distributors. In a letter dated May 20, 1930, an employee wrote to J. P. O'Loghlin, general manager of Fox Film Corporation: You wrote on April 28 advising percentage terms for two more of the Famous Players Canadian Corporation, namely, Capitol Theatre, Kamloops, B.C., and the Empress Theatre, North Battleford, Saskatchewan. We note the terms quoted are straight percentage arrangement, whereas, according to our recrods, we previously sold these theatres when owned independently contracts on flat rental basis.73

Some distributors were not happy with the film rental prices they were receiving from Famous Players. A letter from J. A. Wilson, branch 73

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manager of Fox Film, Winnipeg, to J. R. Granger in New York discusses Famous Players theaters in Port Arthur, Fort William, Regina, Winnipeg, Brandon, Moose Jaw and Saskatoon: The basis on which these houses play our subjects is certainly not conducive to what is necessary from these centres to lift our business out of the mediocre to a worthwhile standing. The difference is considerable, from week to week, from what we used to obtain from these centres. In the city of Winnipeg alone, there is a difference of approximately $400 to $750 on every picture played by them. In the Lyceum Theatre, prior to Nathanson taking over the booking thereof, we used to obtain $500 to $2,500 first run. This year we have played two subjects in there—The Lilly and The Return of Peter Grimm. On the former we received as our share $264.52 and on the latter $180.02. This is an example of the prices we are obtaining throughout the territory from these theatres and it is evident that they are not sufficient weekly revenue.74

If that was so, why did the distributors go along with Famous Players? The obvious answer is that the Canadian exhibition market had already become a buyer's market and was largely controlled by Famous Players. The sellers—the distributors—could not dictate terms to their major buyer. Another plausible answer, perhaps equally credible, was that all distributors had become a part of the system created by Zukor and Nathanson and had come to defend it in their own self-interest. This fact is clearly demonstrated in the case of A. Lauriente, who operated the Rial to Theatre in Trail, B.C., in competition with Liberty, a Dewees Circuit theater. Dewees comprised ten theaters, all located in British Columiba, and was an affiliate of Famous Players. This meant all firstrun films distributed in the country were first offered to Dewees by the distributors. Lauriente struggled with all the distributors for more than two years to book pictures on fair and competitive terms. Except for two independent distributors, Vitagraph and F.B.O., all others had refused to sell any pictures to Lauriente because Dewees had obtained a monopoly on their entire product for the season through written contracts in some cases and verbal contracts in others.75 Only films not used by Dewees were leased to Lauriente. Dewees theaters could use only 150 pictures in a season, and the total number of films released by all distributors that year was about 500. Available evidence shows that Lauriente played all of Warner's sound pictures in 1928, but once the Liberty was wired for sound, they refused to supply him any of their pictures.76 He fought vigorously with American distributors to 74

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obtain films on competitive terms. When he could not succeed with the branch managers of American companies, he sent telegrams and letters to their head offices. On October 3, 1929, Lauriente sent the following telegram to Warner Bros, in New York: "Vancouver exchange holding up all your sound product Is Asking Four times more than others. Opposition being wired two months and has not shown one Warner. We require sound pictures and shorts at once any quick action in the matter will be appreciated."77 Some Warner sound pictures were eventually offered to Lauriente, but on a flat rate basis, rather than the percentage terms he demanded in his letters. The pictures offered did not include first-run films, which were all allocated to the Famous Players affiliate, the Dewees circuit.78 Lauriente, who had been their principal customer a year before, received the same treatment all other independent exhibitors received from American distributors trying to preserve the powerful position of Famous Players. The Fox general manager explained in a letter why distributors supplied their films exclusively to Dewees: We are willing to give Mr. Dewees exclusive use of our product in Trail provided of course that he gives us the proper representation and places us in a position where we can have reasonable and legal excuse for refusing to supply his opposition, for as you know and Mr. Dewees knows, the opposition exhibitor at Trail is looking for some cause to bring legal action against an Exchange in order to have his position thoroughly defined by law.79

More than half of the rental income for American distributors was derived from the Famous Players circuit, so distributors played it safe, thus placing the independent theater operators at a great disadvantage. The monopolistic policies of American distributors contributed to the strengthening of Famous Players in its competition with the independents in Canada's motion picture exhibition industry. Acquiring the necessary number of pictures for a given theater from different distributors is referred to as booking the pictures. When a distributor leases a group of pictures as a whole regardless of their inconsistent technical quality and box-office appeal, it is called block booking. Invariably, the block consists of one or more potential boxoffice hits and several marginal pictures. Furthermore, the number of films in a block is not uniform. Blind booking, on the other hand, is the practice of obtaining an exhibition contract for a picture or a number of pictures that have not been produced and consequently cannot be seen before purchase. 75

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Generally, distributors sold their pictures to the exhibitors prior to the season, which began in September. In the 1920s, theaters showed four-reelers and generally needed two pictures a week. But they tended to book more than the necessary 104 pictures they needed for the entire year, because some of the pictures booked might not be ready for release in that time period or some other problem might arise, such as censors forbidding the release of a film.80 In the Canadian motion picture market, block and blind booking came into practice during the 1920s. These monopolistic trade practices may have been in use before 1920; major distributors did practice them in the U.S. and British film markets. With the exception of United Artists, which had a policy of not selling blocks of pictures, every other distributor in Canada indulged in block booking as well as blind booking.81 Distributors were not able to force this system of booking equally on Famous Players and on independents. The monopoly position of Famous Players enabled them to select films they wanted (apart from their obligation to exhibit all of its parent company's films), while their independent competitors were subjected to block and blind booking. For instance, when asked about Canadian Universal Film Company's booking policies, General Manager Clair Hague stated, "We endeavor to sell the entire group, if possible, but if it is not possible, we sell as much as we can."82 However, Hague sold Famous Players individual pictures as soon as such films became available.83 Before the season began, the distributors would present Famous Players with a list of proposed releases, giving Famous Players first choice of films. This policy allowed Famous Players to choose all the potential box-office hits. Because of their enormous market power, Famous Players could refuse certain pictures offered to them, but the independents could not. It was in the best interest of distributors to sell as many pictures to Famous Players as possible. Under this system, independents often ended up buying more pictures than they could play in their theaters in order to obtain a sufficient number of box-office attractions.84 Another consequence of this booking practice was that independents purchased several undesirable pictures, which put them at a competitive disadvantage. Frederick Guest, an independent exhibitor, who operated the Empire, Delta, and Queens theaters in suburban Hamilton, Ontario, the Dundas Theatre in Dundas, Ontario, and the Stanley Theatre in Vancouver, testified forcefully against the block-booking policy: 76

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Block booking means death, in the end, of independent exhibitors. As things are now, we have no chance with Famous Players when we are compelled to line up all the product of all these companies. For instance, . . . my opposition at the Delta is a Famous Players' house, the Strand; when I sign for pictures I have got to take the whole year's product of say Warners, and second run . . . or none.85

When asked why the independent exhibitors had to buy blocks of pictures and why they could not choose pictures they wanted to exhibit, Percy Taylor, manager of Canada R.K.O. Distributing Corporation, answered, "Who will pay for the production of the other pictures?"86 In other words, the lower-grade pictures were financed by extracting more rental fees out of the independently owned theaters. The compulsory nature of block booking seemed an economically sound practice to distributors and producers. It saved the marketing costs involved in selling each picture separately and created a minimum assured market for all grades of pictures. It effectively reduced competition in the distribution market in Canada for all vertically integrated U.S. production companies. More importantly, in the Canadian context, all the available playing time on independent screens was monopolized by distributors who sold in blocks. It was difficult or almost impossible for an independently produced film to get playing time. Although there was a certain level of entrepreneurial zeal among the pioneer investors, producers, distributors, and exhibitors, Canada's budding feature film industry never attained a secure position. Canadian audiences, still bound by a colonial mentality, demanded British feature films only in reaction to what they perceived as American propaganda on their screens during World War I. The prominent Canadian capitalists of this early era set up business structures that imitated the business patterns of the American film industry and acted as brokers for American films in order to realize assured profits. The rise to prominence of industrial and banking capital in the U.S. film industry and the consolidated production, distribution, and exhibition structure of the early 1920s extended into Canada as though it were another state, thereby negating any possibility of independent development in that country. Canadian capitalists willingly collaborated in the enterprise of total submission to extensions of foreign monopoly power. The patterns of Canadian government intervention in the motion picture industry were also set in this period. The government encour77

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aged production of newsreels and shorts for propaganda purposes while pursuing a laissez-faire policy in the feature film industry. It sought voluntary cooperation from various segments of the business community for war propaganda. The small capitalists in distribution and exhibition, who were not subjected to the consolidation process initiated in the interests of monopoly capital (national and international), were reduced to a weak market position. They were treated in the same manner as the small capitalists in the American film industry by the vertically integrated firms. But as Canada was a different country, ostensibly trying to maintain a distinct nation-state status even if constricted by a colonial mentality, it offered Canadian-owned unintegrated enterprises an opportunity to exert pressure on the government.

78

2. Dependency Deepened, 1920-1940:

The American Film Industry Cartel

The extension of the American film industry's monopoly power into Canada was not without contradictions. The industry was characterized by intense rivalry among the major firms for capital, markets, and star commodities. It also faced the growing pressure exerted by various public groups and independents to regulate the industry in the United States. The leading vertical monopolies responded by organizing themselves into a trade association in their domestic market, not only to lessen competition among themselves but also to fend off potential state intervention in the industry. That institutional structure was extended into foreign markets where similar threats existed. The overall effect of such institutional transfer into Canada was to deepen its dependency on the American film industry.

The Cooper Organization The American motion picture industry's interests in Canada were safeguarded by a distributors' organization, the Motion Picture Exhibitors and Distributors of Canada, which was incorporated in November 79

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1924. It had been active at least two years prior to its official existence. The application for incorporation stated the following as the organization's objectives: To promote and conserve the common interests of those engaged in the motion picture industry in the Dominion of Canada by establishing and maintaining the highest possible moral and artistic standards in motion picture production, by developing the educational as well as the entertainment value and the general usefulness of the motion picture by diffusing accurate and reliable information with reference to the industry, by reforming abuses relative to the industry, by securing freedom from unjust or unlawful exactions and by other lawful and proper means.1

In essence, it is the langauge of self-regulation, a strategy developed in the U.S. market. In an industry marked by intense rivalry between small capitalists and big capitalists and foreign monopoly power, the organization spoke of common interests and attached them to higher moral and artistic standards in production. It planned to mount a public relations effort on the Canadians concerned about the undesirable influence of the motion pictures and the government's taxation and other policies aimed at regulating the industry. It was popularly known as the Cooper Organization after its first president, John Alexander Cooper, who put its policies into effective practice. Cooper lobbied against censorship, amusement taxes, and any legislation aimed at curbing the monopoly power of his member companies. He also worked vigorously to create a favorable corporate image for them. The Cooper Organization was modeled on the Motion Picture Producers and Distributors of America (MPPDA), better known as the Hays Organization, which began in 1922. Headed by former post master general Will H. Hays, MPPDA set the pattern for reducing intercapitalist rivalry in the American film industry. It presented a united front to the U.S. and foreign governments in matters of policy affecting the industry, on behalf of the vertically integrated companies. The Hays Organization was also responsible for public relations activities in various nations around the world. Hays appointed Major Frederick L. Herron to represent the American film industry abroad. Herron spent almost three years cultivating officials in the U.S. departments of State and Commerce, and managers and representatives of member companies in foreign markets.2 The Hays Office controlled the Cooper Organization and directed its policies and activities from New York.3 The Canadian association began 80

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Will H. Hays (left), president of the Motion Picture Producers and Distributors of America (1922-1946), and film producer Jesse L. Lasky (right). (Courtesy of the Museum of Modern Art/Film Stills Archive.) with a loan of $2,500 from the Hays Office. The Cooper Organization's operating funds were collected every year largely from American distributors. In 1929, total revenue was $27,236.56, with American distributors paying $21,841.56—80 percent of the association's annual budget—with the balance collected in Toronto.4 An examination of its membership reveals that it was made up primarily of New York distributors who represented U.S. producers. Famous Players played a significant role in the Cooper Organization through financial contributions and by the presence of its officers on the board of directors. According to Cooper, Famous Players participation gave the impression of it being representative of exhibitors, thus serving a political purpose: We did, however, have the name "Exhibitors" in the chartered name of our Company, and so I arranged with Mr. Cohen and Mr. Bragg that we 81

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should have twenty of their men in as members nominally, in order that when I went to Ottawa or other places and dealt with the questions of censorship, or amusement tax, or copyright music or performing rights, I would be able to say that I represented some of the theatre interests.5

As Famous Players was vertically integrated with a major American film company, it did not represent Canadian-owned independent theaters. Its presence on the board of the Cooper Organization was essentially window dressing. What impact did the Hays Office have on Canada's motion picture industry through the Cooper Organization? The Cooper Organization's political activity in the 1920s was restricted to lobbying censor boards in various provinces to liberalize rules and to redirecting the policies of some social organizations that supported strict censorship in Canada. Cooper personally handled public relations matters and was often quite effective. A report by H. L. Lovering of the Committee on Films, Amusement and Printed Matter to the annual meeting of the Local Council of Women for Saskatchewan held in Regina in January 1927, stated: I would like to call particular attention to the fact that motion picture producers have appointed their own official censor, namely, Col. John A. Cooper. While we do not claim that it was the result of any one council's activities, it is the result of activities of such organizations as ours that have awakened moving picture producers to a sense of their responsibilities in checking to some extent the evils in this modern form of entertainment, so fraught with possibilities for the elevation or degradation of our people. Col. Cooper is keeping a careful eye, not only on the pictures themselves, but also on the advertising of them. Of course, our censor boards are doing good work, but the motion picture producers themselves deserve credit for trying to keep the screen clean.6

Cooper thought this was an important enough development that he sent copies of the report to the general managers of all exchanges in Canada.7 While his activities as a paid employee of the U.S. producers were aimed at obtaining a relaxation of the standards set by various censor boards, he seemed to have persuaded the Council of Women to believe he was actually working on behalf of the public. His organization had not made any overt request to have a picture censored; indeed his files were filled with criticisms of censor boards, particularly in the province of Quebec, where he had suggested a change of personnel because their decisions were regarded as unsatisfactory.8 To further its public relations effort, the Cooper Organization at82

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tempted to hire members of censor boards. Alice Fairweather, hired away from the New Brunswick censor board, was deployed to assuage potentially damaging decisions made by some social organizations. According to the minutes of the Cooper Organization, The Annual Meeting of the National Council of Women was held at Niagara Falls last week with representation from all the provinces. Miss Alice Fairweather, our secretary at St. John, was elected as a delegate from New Brunswick and attended the meetings. She cooperated with the National Cinema Committee and, I believe, did very good work on behalf of the Industry. A resolution was passed asking for stricter censorship of vaudeville and motion pictures, but the stress of this Resolution was mainly against vaudeville and similar exhibitions. 9

The main thrust of the Cooper Organization was to lobby against film import quotas at various levels of the Canadian government. By 1929, the public was intensely concerned about the content of motion pictures on Canadian screens and the lack of British pictures. Explaining their absence from Canadian screens became one of the main tasks of the Cooper Organization. In many sections of the country, patriotic Canadians were demanding pro-British pictures.10 To avoid any potential regulation of screen time favoring British imports, Cooper employed several methods to explain the lack of British films in Canada. One method was to employ public officials to speak to community groups in favor of American distributors. In June 1929, he tried to hire J. E. Hawkshaw, a member of the censor board in British Columbia: We know that you are able to make a speech and that you could talk to the various organizations and explain to them just what the situation is with regard to the various phases of our relations with the public. You could explain to them why we did not get more British pictures in this country than they have in England or Australia. You could also explain the methods adopted by other provinces to make the children's pictures more successful, and you could act as intermediary in making the theatre owners more amenable to the desires of the public. I do a great deal of that work in Ontario, but Canada is too big a field for me to cover.11

Hawkshaw rejected Cooper's offer, tersely stating, "I feel that I am really not the sort of woman you are looking for, as my well-known affiliations and interest in the British Empire Marketing Board would hardly match up with what you want me to do."12 It is not that British films were unavailable at the time. The Cinematograph Films Act of 1927 in Britain required that screen time be made available to British films and that U.S. distributors in the United 83

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Kingdom carry some of them. The policy spurred growth in the production and exhibition sectors.13 Pinewood, Denham, Elstree, Shepperton, and other studios emerged during the ten-year period following passage of the act. In 1926, the year preceding the act, 26 pictures were produced. In 1928, 128 pictures were made. Many were lowbudget films and came to be called "quota quickies." U.S. distributors were not interested in marketing British pictures in general and the "quickies" in particular, either in England or in Canada. When provincial legislatures responded to the lack of British films in Canadian theaters by proposing to legislate a screen quota, the Cooper Organization moved swiftly to lobby against it. The British Columbia legislature was to deal with a quota bill in 1929, when Cooper received the following telegram from W. R. Marshall, vice-president of the Film Board of Trade in Vancouver: Reliably informed that Government Bill to be introduced immediately present session local legislature in which quota law to be established making it compulsory for exhibitors to play twenty percent Canadian produced pictures. Exhibitors lining up to oppose this measure and it is vital that distributors unite to kill the Bill. Heavy lobbying will be necessary attain results and start should be made Monday. Exhibitors' representative leaving for Victoria Sunday and at special meeting Film Board held today it was unanimously resolved that Donnenworth should be instructed to accompany him. Adequate financial appropriations from your office urgently required and suggest same be wired. 4

Cooper requested J. R. Muir, the district manager of Famous Players in British Columbia who had handled political matters in that province on previous occasions, to campaign against the bill. Muir sent the following cable on January 26, 1929: Government amending censorship act to give them power to censor all newspaper and bill board advertising and impose British film quota also to force theatres to run ten minutes patriotic film every performance. This bill is fathered by Attorney General Pooley am going to do everything possible to have this bill defeated and I believe I can bring enough influence to bear to do this. . . . Leaving for Victoria tomorrow night 15 with Holland will wire you from there regards.

It took Muir only four days to accomplish his task. He sent the following message to Cooper: "Patroitic and British quota features eliminated from bill we think we have censoring of advertising well in hand will report to you further after our next interview with Attorney General tomorrow."16 The total cost of the campaign was $5,000, and the 84

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provisions in the bill relating to the quota were eliminated before the bill was introduced in the legislature. A similar quota bill proposed by the Ontario government in 1931 generated the following statement from Haskell Masters, general manager of United Artists Corporation in Canada, to his company's headquarters in New York: "I certainly hope that Col. Cooper and the Motion Picture Exhibitors and Distributors Association gets busy and brings pressure on the proper parties, to stall this bill along, as we are having enough trouble in Canada, without being compelled to supply English pictures."17 The Cooper Organization at that time was busy fighting a copyright bill being considered by a committee of the House of Commons. The bill was intended to protect rights of composers and authors of music. Cooper noted in a memo to all the distributors his success at negotiating with the committee to protect his employers' interests: "After several conferences, the House of Commons Committee agreed to eliminate the words 'dramatic' and 'literary' from this Section and thus ensure that the regulations proposed should not apply to motion picture producers and distributors. This is quite satisfactory."18 In addition to these political activities, the Cooper Organization served an economic function for American film companies in Canada. Certain American business practices and organizational methods were introduced in Canada to accomplish that goal. Prior to 1926, there was no uniform contract used by exchanges when selling pictures to exhibitors. In May 1925, Cooper was authorized by his organization to compile a uniform contract that would be similar to the Standard Exhibition Contract used in the United States at the time.19 This contract had many discriminatory clauses such as one requiring cash in advance on shipments to independent theater owners and another refusing to sell pictures to "booking combinations," which would have increased the bargaining power of independent theaters.20 Theater owners who breached the contract in any way were put on a black list and distributors instructed not to sell pictures to them. Essentially, the Standard Exhibition Contract gave coercive powers to the distributors and helped them contain the power of the independent exhibitors. Smaller companies such as Universal and Goldwyn were often competing with large, vertically integrated corporations such as Paramount. The independent exhibitors devised their own tactics to circumvent the monopoly power of the producer-distributors. Such tactics were systematically dealt with by the united front of the producer-distributors through their trade association, the Cooper Organization. Any rivalry 85

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among member companies in competing for screen time was eliminated by the organization in the long-term interest of all members. The mechanism used to accomplish these goals was the film boards of trade. The Cooper Organization set up film boards of trade in each key city in Canada. Through these affiliated trade associations, almost all motion picture marketing was organized to deal with independent exhibitors according to prescribed rules. The net effect of this mechanism was to reduce competition in the distribution market in the interest of the vertically integrated large film producers. For instance, one independent exhibitor in Calgary sold his theater to another company and became an employee of the new owner. Under the rules of the Standard Exhibition Contract, the new owner had to play all the pictures contracted by the previous owner of the theater. When ownership changed, two American distributors, Fox and Universal, contracted some of their pictures with the new management. This, however, was not acceptable to the Cooper Organization. It ordered the two distributors to cancel their new contracts, which they did.21 Containing such rivalry among the member companies benefited all of them in the long run. The Film boards of trade appear to have been effective self-regulators in the industry. Consider the experience of United Artists, which illustrates how arbitration under the boards worked to the advantage of distributors and against the independent exhibitors. During one year, United Artists filed claims amounting to $51,000 against the exhibitors. Of that amount, $24,000 was adjusted before any arbitration hearings were held by the boards. Awards were secured for approximately $21,000 worth of claims, which were actually collected from the exhibitors.22 This arbitration mechanism may have reduced the expense for distributors of lawsuits, which were common prior to the formation of the boards of trade. The Standard Exhibition Contract was held to be in restraint of trade and thereby in violation of Section 1 of the Sherman Act in the United States.23 On November 24, 1930, the U.S. Supreme Court also declared the activities of film boards of trade illegal under the Sherman Act. In his opinion, Justice McReynolds stated: Ten producers and distributors of films, controlling 60 percent of the business, agreed to contract with exhibitors only according to Standard Form and then combined through thirty-two local Film Boards of Trade with other distributors, who with themselves control 98 percent of the entire business. The Film Boards appoint Credit Committees and these operate under the rules of above outlined. The obvious purpose of the 86

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arrangement is to restrict the liberty of those who have representatives on the Film Boards and secure their concerted action for the purpose of coercing certain purchasers of theatres of excluding them from the opportunity to deal in a free and untrammelled market.24

In Canada at that time, American production and distribution companies controlled almost 95 percent of the distribution market. McReynolds's statement applies equally well to the Canadian industry. But the concerted action of the American film industry cartel, while illegal in the domestic market, was exempted by the Webb-Pomerene Export Trade Act of 1918 from antitrust liabilities as long as their cartel-like behavior did not impinge on the domestic market. Regulating anticompetitive behavior of American corporations in foreign markets fell to foreign governments. Canada's antitrust law was ineffective in dealing with the American film industry cartel.

Combines Investigation The oppressive market conditions faced by independent exhibitors and, especially, producers (who were almost nonexistent in the Canadian motion picture industry because of the monopoly control of the American film industry cartel) led to an inquiry under the Federal Combines Investigation Act in September 1930. There may have been another reason for the government to institute such an investigation. The government had turned a deaf ear to the complaints voiced by the independent exhibitors for many years. The restructuring of Paramount Famous—Lasky Corporation in the United States generated internal feuds in its Canadian affiliate, Famous Players Canadian Corporation. Dissatisfied parties within the board of directors and the company's shareholders debated their concerns publicly in the press, drawing the attention of the government to the public policy issues of the controversy. On April 24, 1930, Paramount Famous—Lasky changed its name to Paramount Publix Corporation. It was established as a holding and operating company and comprised several related enterprises in motion picture production, distribution, and exhibition. It held a 50 percent interest in the William Morris Agency, a theatrical employment agency, and a 50 percent interest in the Columbia Broadcasting System, an emerging radio network.25 Paramount owned real estate on Broadway in New York City and also other businesses. Its subsidiaries 87

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in film distribution operated in several Western European countries, notably England, France, Germany, and Spain. It also had holdings in Cuba, Mexico, and Argentina. Paramount's assets in December 1929 amounted to nearly $236 million.26 Paramount was the antecedent of the cultural conglomerates that figure prominently on the Fortune 500 list of corporate giants today. A monopolist's dream, Paramount allowed Zukor to gain access and control of various types of businesses around the world.27 In April 1930, Paramount offered stockholders of Famous Players Canadian Corporation four shares of its stock for five shares of the Canadian subsidiary.28 The purpose of the stock manipulation was clearly to narrow ownership of the company to a handful of people, giving Paramount more control. A large number of Famous Players shareholders approved the Paramount offer. This resulted in Paramount controlling 93.786 percent of Famous Players Canadian Corporation.29 Zukor remained head of the Canadian company's Board of Directors. The stock deal caused considerable discontent among a sizable minority of Famous Players stockholders in Canada who were unhappy about losing complete control of the company to the American frim.30 Sitting atop the pyramid of control was a voting trust of three men—Zukor, Nathanson, and Killam. Any two of them could jointly decide company policy. As Killam sided with Zukor, thereby enhancing the power of Paramount, sharp disagreements appear to have existed in the three-man voting trust. Nathanson was later found to have been working on a deal to sell Famous Players to a British combine controlled by Fox Film Corporation in the United States. Killam and Zukor subsequently ousted Nathanson from his high position in Famous Players.31 The controversial stock deal, the rivalry between major American producer-distributors and their officers, and the combines inquiry generated a good deal of press coverage.32 Whatever the reasons, the federal inquiry, in itself a significant development, was initiated by an order-in-council on September 23, 1930. A commission was struck to investigate the motion picture industry in Canada, with Peter White, a government lawyer, appointed sole commissioner. After nearly seven months of inquiry, White submitted his report to the minister of labour in Ottawa. During the hearings, the American film industry cartel—the Hays Office—played the crucial role of unifying all distributors in Canada to speak with one voice. The commissioner first gathered evidence in closed hearings conducted for two months in the offices of the Famous Players. He examined contracts, correspondence, and files of the com88

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pany. Various executives of the company were interviewed as well as John Cooper. Available data suggest that sufficient evidence damaging to the American monopoly interests was gathered by the commissioner.33 An interesting account of how the Hays Office tried to contain the potential damage from the inquiry to its member companies is found in a memorandum by Edward T. Raftery, the counsel and secretary of United Artists Corporation in New York. Raftery learned of the Canadian government's inquiry from United Artists' Canadian general manager, Haskell Masters, who was about to appear as a witness on behalf of the Cooper Organization in Canada. Raftery interrogated Masters about the status of the investigation and then told Masters not to go on the stand "until he received direct instructions" from Raftery. The Hays Office Law Committee gathered at a hurriedly called meeting on February 23, 1931, in New York. Raftery informed them how an R.K.O. branch manager in Canada had been "subjected to a grueling examination by the Commissioner and that much of his testimony was ill advised and badly handled." Will Hays, who headed the committee, appointed Raftery to go to Toronto and study the situation so that action could be taken on behalf of the member companies. In Toronto, Raftery met with the counsel for Famous Players, its general manager, Cooper, and managers of other American distribution companies. He attended an open hearing session chaired by Commissioner White to gain some insight into the inquiry and also examined some of the testimony submitted by the distributors. Raftery concluded that it "was possible for the Commissioner to make a report to the Minister of Labor of several possible combinations, all of which would be in violation of the Act." He telephoned New York and arranged for a meeting of the Law Committee for that Friday morning. Upon hearing his report, the committee authorized Raftery to contain any ensuing damage from the federal inquiry by returning to Canada on behalf of the American distributors. Raftery engaged the Toronto law firm of Mason, Foulds, Davison, Carter, and Kellock to represent the American distributors. He believed the commissioner could find a combination existing between Paramount's subsidiaries—Famous Players and Regal Films—and Columbia Pictures Corporation, the stock of which was held by individuals closely associated with Famous Players, or else a combination existing among all distributors to the detriment of independent exhibitors. Raftery prepared favorable witnesses and documents to show that the independents were not treated unfairly and that the Standard Exhibition Contract and the boards of trade protected exhibitors equally.34 89

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Despite such forceful intervention, Reftery's fears came true in the commissioner's report. The commissioner's general conclusion was that since at least 1926, a combine existed in the motion picture industry within the meaning of the Combines Investigation Act. He named all the U.S. distributors and also Regal Films, a Canadian company, and Famous Players and some of its affiliates as parties to the combine.35 The Cooper Organization was also included in the list of companies. However, it was not until 1932 that a suit was filed in an Ontario court against those offenders under the Combines Investigation Act.

The Case and the Law How did a federal combines investigation end up as a provincial government suit in a provincial court? Apparently there was confusion about who had the constitutional authority to administer justice in Canada.36 The provinces claimed that the British North America Act (Canada's constitution) gave them exclusive right to administer the laws, including those of the federal government, an issue that was not finally resolved until the 1940s. The attorney general of Ontario filed a suit under the Combines Investigation Act against seven distributors, Famous Players and some of its affiliates, and the Cooper Organization for operating a combine or conspiring to restrain trade in that province. It was the first significant attempt by the state to curb monopoly abuses in Canada's motion picture industry. On March 18, 1932, Justice J. Garrow of the Ontario Supreme Court cleared the accused companies of all charges. The court held that the Standard Exhibition Contract with compulsory arbitration was legal under the Canadian law. The crown had made a weak presentation of evidence; it relied heavily on U.S. antitrust laws and judgments, and the evidence presented did not prove—in the judge's opinion—that a combine existed in the province of Ontario. The court recognized that Dewees, one of the Famous Players affiliates in British Columbia, had monopolized all the supply of film in 1929 will full cooperation from the U.S. distributors to eliminate competition from an independent (see Chapter 1). But it did not hold the distributors responsible for their conduct. It was Dewees who was responsible, according to the court.37 Though the judge recognized that Famous Players monopo90

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lized the supply of films in British Columbia, he did not permit the crown to use that as evidence against Famous Players in Ontario. Famous Players and the American distributors were acquitted on the basis that the prosecution could not establish that the alleged combine was detrimental to the public interest, as the ticket prices did not go up in the period under consideration.38 Why did the federal government fail in stopping monopoly abuses in the Canadian motion picture industry? Some of the reasons are in the content of the Combines Investigation Act itself. Mergers and monopolies in themselves were not illegal under the act. Conspiracy to restrain trade had to pass the stringent test of complete or virtual elimination of competition in the market. Furthermore, the prosecution had to demonstrate that participation in mergers or monopoly was detrimental to the public interest in competition.39 Horizontal combination between Famous Players and its competitors was not illegal as far as the courts were concerned. Horizontal monopolies such as the boards of trade and related associations and their policies and practices did not constitute illegality. The court gave the following reasons for its judgment. First, the prosecution had to prove that agreements between the distributors lessened competition unduly. The word unduly meant that the case made by the prosecution had to prove that competition was virtually eliminated in the distribution market. Second, and equally important, section 32 of the act, which prohibited agreements to lessen competition, covered only production and distribution of goods while excluding certain services. The defense argued that exhibition of films to patrons in a theater was a service, which was not convered by the act. This gaping hole in the act was not plugged until 1976, when the Combines Investigation Act was amended to include services.40 Why didn't the Ontario government appeal the court decision? Why didn't the federal government amend the act to give it more power to deal with monopolistic practices in the industry? These two questions are interrelated, and the answers must be found in the political and economic realities of Canada when the act was passed by Parliament. During the years 1897 through 1929, the Canadian economy had experienced a capitalist expansion. From a predominantly agrarian economy, it was growing into a manufacturing one. Large industrial manufacturing giants—Canadian General Electric, International Harvester, Canadian Westinghouse, and the auto and tire corporations— created during that period came to dominate their respective industries.41 The concentration of economic power in such corporations 91

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caused great concern among small businesses, which were often the victims.42 The first anticombines act in Canada was apparently introduced in 1888 by a small business owner. But the act did not provide for investigation of alleged combines.43 The steadily rising prices of commodities and accumulation of wealth in a handful of corporations alarmed the public and small businesses in Canada. The response of the Liberal government to mounting pressure from the public was a bill that the minister for labor, W. L. MacKenzie King, guided through Parliament in 1910.44 The new act provided for investigation of alleged combines and stipulated that the reports of investigation be made public but no fines be levied unless the offender continued operation after the publication of the report. The act did not require a restraining order by the courts.45 Although hailed by the Liberal government as a major piece of legislation to correct monopoly abuses in the industry, the act was never seriously intended to eliminate monopolies. MacKenzie King, who believed that big trusts might be beneficial, argued that "this measure seeks to afford the benefits which arise from large organizations of capital for the purpose of business and commerce."46 King further assured his fellow politicians and the business communities of Montreal and Toronto (more often than not they were one and the same) that the act was not intended to curb the growth of monopoly power of corporations but only the wrongful use of that power. King stated, "[This] legislation is in no way aimed at trusts, combines and mergers as such, but rather only at the possible wrongful use or abuse of their power, of which certain of the combinations may be guilty."47 Prime Minister Sir Wilfrid Laurier's Liberal government advocated free trade with the United States, while direct investment from America was on the rise. American businesses were not going to invest in Canada if there were stringent laws against monopolistic corporations. Consumers, small business, and workers complained to the government about monopolies because they felt their sweat and labor would enrich the select few who invested in monopolies. The Combines Act of 1910 did not meet those demands. Again, the government policy created the illusion of acting on a problem, while in reality monopolies would flourish. Only one inquiry—into the shoe industry—was undertaken under the authority of the act, but nothing came of it.48 The act remained on the statute books until 1919, when it was repealed. The ineffective character of combines legislation in Canada should be viewed primarily in light of the interest the two dominant political parties had in attracting American direct investment to Canada. That 92

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fact suggested a general economic policy for Canada, which has endured. The Liberals strongly advocated American investment in the early 1900s, and by 1911 American direct investment had enveloped approximately one-fourth of all Canadian manufacturing enterprise. The Conservative election slogan in 1911, "No truck or trade with the Yankees," was campaign rhetoric. During the depression in the 1930s, the Conservatives were in power. Their leader, R. B. Bennett, proposed several legislative measures against monopolies and unfair business practices.49 But Bennett's economic program could not be fully implemented because of opposition from within his party and from the opposition parties.50 In the federal election of 1935, the Liberals assumed power once again. MacKenzie King, the prime minister, pressed on with his party's policy of increased trade and direct investment from the United States.51 In courting American investment dollars, the political-economic establishment in Canada ignored all public concerns about monopoly effects on indigenous enterprise. Domestic production of cultural goods such as motion pictures was not perceived by the Canadian government as important for the survival of Canada as a nation. The politicians from the dominant parties looked to Great Britain for cultural inspiration and leadership. They saw Canada as a mere consumer of imperial culture rather than the producer of an indigenous culture. The economic imperatives of continentalism, advocated by the dominant parties, gave no expression to nationalism. As such, the investigation of 1931 into the Canadian motion picture industry and the decision of the Ontario Supreme Court did not alter the U.S. film industry's monopoly control of the Canadian film industry. The Cooper Organization, as an extension of the American film industry's power in Canada, set the pattern for the relationship between the Canadian government and the film industry. It also helped contain the rivalry among member companies as well as between members and the competing unintegrated enterprises by coercing them to follow uniform contracts and arbitration mechanisms that would enhance the power of the producer-distributor corporations rather than their competitors. In short, the institutional structure developed in the United States and dominated by the Hays Organization which represented the interests of the leading oligopoly firms was extended into Canada for the same purpose. A fundamental problem in the Canadian motion picture industry was foreign control by vertical integration with U.S. oligopoly firms, which became entrenched in this historic period. The law and the courts did 93

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not restructure the industry to favor Canadian capital—either financial or artistic. Failure of the Combines Investigation Act and the courts to deal with foreign monopoly control of the Canadian theatrical motion picture market meant increasing control and underdevelopment of indigenous unintegrated enterprises involved in production, distribution, and exhibition of films. In the decades that followed the combines inquiry, Canadians would try again to regain control over their film industry.

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3.

In the Shadow of the U.S. and British Film Industries The structure of domination that extended into the Canadian film industry during the years 1920 through 1940 by the American film industry was to endure with some minor changes. Paramount Famous-Lasky, the leading vertically integrated firm in the United States, dominated the Canadian feature film market through its subsidiary, Famous Players Canadian Corporation. This structure lasted until the early 1940s, when Odeon Theatres was organized as a circuit, introducing some competition in the exhibition and distribution markets for a short period of time. The American majors, however, reorganized the industry structure in Canada to eliminate competition between the two major circuits in order to enhance their own control in the Canadian exhibition and distribution markets. The independents organized themselves to oppose foreign control. Their collective failure and the Canadian government's role resulted in the continuation of foreign control of Canada's feature film industry.

Formation of Odeon Theatres Among the few entrepreneurs who tried to build a theater circuit in Canada to compete with Famous Players were N. A. Taylor and N. L. 95

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Nathanson. Taylor's strategy was to profit from second-run films by operating theaters in towns with fewer than one theater seat for every ten persons. He knew he could not acquire first-run films, given the monopoly of Famous Players. He began to operate second-run theaters in Ontario in the mid-1930s and in 1938 opened a new theater in Ottawa called the Elgin. United Artists, a minor production company at the time, broke off its relations with Famous Players and offered its firstrun films to independents such as Taylor. Eventually, United Artists returned their films to Famous Players, but while the supply lasted it benefited Taylor. The United Artists franchise and profits accorded Taylor status in the industry. He was noticed by Nathanson, who was setting up a company called Odeon Theatres. Taylor was offered a partnership in Odeon, which he refused, apparently because Nathanson reneged on his offer and tried to make Taylor an employee. Taylor accepted an offer in 1941 from Famous Players to manage twenty-five of their treaters in addition to his seventeen-theater chain.1 Nathanson was forced off the board of Famous Players in 1929 for swindling his business partners. At that time he had tried to set up a theater chain with the Fox franchise, which did not materialize because the Fox Film Corporation went into receivership in the United States.2 The stock-market crash drove Paramount into receivership by 1932, but when it rebounded the following year Nathanson had maneuvered himself back into Famous Players as president of the board. The rest of the board resigned in protest. While president of the board, Nathanson began acquiring theaters that were in competition with Famous Players through an agent, Oscar Hanson. Once again, this scheme was discovered, and he was forced to sell his acquisitions to Famous Players. Nathanson's contract with Paramount expired in 1940, and Barney Balaban, who succeeded Adolf Zukor as president of Paramount, sent his own deputy, J. J. Fitzgibbons, to head the Canadian subsidiary's board. When Nathanson left Famous Players, he took some of the affiliated circuits with him to strengthen Odeon Theatres, which was being organized by his brother Henry. The Famous Players partnership contracts arranged by Nathanson included a clause allowing independent theaters to leave Famous Players as long as advance notice was served.3 The Franklin-Herschorn circuit in St. John, New Brunswick, was one that joined Odeon Theaters. Henry Nathanson formed Odeon Theatres in April 1941 with a nucleus of four independent theaters in Vancouver.4 The first three partners to join N. L. Nathanson and Odeon Theatres were the Henry 96

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Morton family, which had three theaters in Winnipeg and one theater in Saskatoon; Jack Barron, who operated one theater in Calgary; and Henry Friedman, who ran one theater in Edmonton. These were all big downtown theaters that showed second- and third-run films. Initially they joined Nathanson as fifty-fifty partners; eventually they sold their shares to him.5 Through a partnership agreement with Samuel Firestone, Odeon Theatres became a national circuit with almost one hundred theaters. Haskell M. Masters was appointed general manager of the holding company, General Theatre Corporation.6 Nathanson thus led the formation of an independent theater circuit to compete with Famous Players. The formation of Odeon raises two questions. If American monopoly power barred entry into the exhibition market in Canada, how could one man build a competing chain and obtain a share of that market? Furthermore, if he could do it, why did others not follow suit? It had been a historical fact in Canada that no exhibitor could successfully operate a chain unless it had a guaranteed supply of first-run films from a major American studio. The history of the Aliens, who built their circuit with the Famous-Lasky and First National franchises, and then Nathanson, who built the Famous Players circuit with the Paramount Famous—Lasky franchise, demonstrated that basic law of development in the Canadian film industry. Nathanson's brother Henry managed Regal Films, which had exclusive franchises from several American producers, including MGM, another major vertically integrated company. MGM had survived the Great Depression with many box-office attractions, thereby becoming a lucrative franchise for any exhibitor. Using the MGM bait, Nathanson succeeded in persuading several independents across Canada to join Odeon. But Regal films was a wholly owned subsidiary of Paramount in 1931. No corporation would allow its own subsidiary to help build a theater circuit that possibly could threaten its own monopoly power. It is possible that Paramount had sold its interest in Regal to Nathanson by 1940. Another plausible explanation is that the independents may have been induced to join with better terms. Whatever tactics were used to create a circuit, N. L. Nathanson was successful, and in May 1941 Odeon Theatres began operation. In 1942, Famous Players sued Nathanson over the ownership of the company. The case apparently dragged on after Nathanson died in 1943 but was dismissed in 1948 with the consent of all parties concerned.7 Why no one else followed Nathansons' lead remains to be answered. No other exhibitor in Canada commanded the attention Nathanson 97

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Nicholas Schenck, president of Loew's. (Courtesy of the Museum of Modern Art.) received. Having been managing director of Famous Players for almost twenty years, he had dealt with independent exhibitors and knew them well. He brought with him Tom Bragg and Clarence Robson, both top officials at Famous Players. A fifty-fifty partnership with an exhibitor-distributor who had experience interacting with Paramount, MGM, Fox, and others, may have seemed attractive to small independent entrepreneurs.8 In addition, the independents could not turn down a film offer from a major American company. Evidence suggests that some of the independents deserted Nathanson when he could not deliver the MGM films on a first-run basis.9 In the months following the formation of Odeon, a battle between Famous Players and Odeon ensued over sharing of film product from the major American companies. It culminated in a meeting in New York at the office of Nicholas Schenck, president of Loew's, the parent company of MGM. Nathanson, Fitzgibbons, Balaban, and others were also present. The result was a product allocation policy to keep in98

In the Shadow

traindustry rivalry contained among competing theater chains. Famous Players kept the MGM products, but it would be distributed by Regal films. Odeon theaters received a split from the product of some of the smaller distributors. George P. Destounis, president of Famous Players, explained how the two circuits monopolized first-run films of all the leading American producers: Well, it's been a historical fact that. . . the major distributors aligned themselves with either one circuit or the other. People like Paramount and Warners and United Artists will play 100 percent Famous, and people like Columbia and two-thirds Universal and one-third Fox would play Odeon. You must bear in mind that in the original setup there were companies like RKO [and] MGM as we know it, and it was agreed, I understand, early [in the 1940s], how the breakdown [worked] when Odeon was first formed.10

The truce agreed upon by the major producer-distributor combines and the two Canadian theater circuits points out another important factor that may have led to the formation of Odeon. The leading firms of the time—Paramount, MGM, Fox, Warner, R.K.O.—were competing fiercely with each other for talent, audiences, and story material while at the same time working out some measure of coexistence. In the Canadian market, controlled by Paramount's subsidiary Famous Players, all competing interests had to dance to Paramount's tune. Famous Players overbooked first-run films from all their suppliers in order to ensure that their competitors, the independents, would not have access to these films and gain any power. Given the fixed playing time available to any exhibitor in its theaters, all the films supplied to Famous Players could not be played in its theaters. Expectedly, rental terms were also depressed. For distributors other than Paramount, it must have been a frustrating situation in Canada. As Fox had tried to form a competing chain of theaters with Nathanson, there may have been others willing to do the same to open up the market for themselves. It would have been in their interest to have another first-run theater chain in which they could play their films. Thus, Nathanson's plans with Odeon helped their goals as well. These monopolistic agreements between the two theater circuits and the American distributors negated the possibility of Odeon growing in size and importance so as to pose any competition to Famous Players. Odeon obtained the first-run films of what were at the time mostly minor companies and shared part of the Fox supply. Without the exclusive rights to a major producer's product, no circuit in Canada 99

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flourished. Odeon would grow, but it could be controlled as long as it was sharing first-run films with Famous Players. Thus, the integration of the new theater chain with the Hollywood major producer-distributors was complete. The presence of Odeon, another theater circuit monopolized by major American film producers of the day, was history repeating itself for the independent exhibitors and producers in Canada. As Table 2 demonstrates, the boom in theater attendance during World War II enriched the foreign-controlled circuits and the American distributors. The Canadian-owned single-theater operators and small chains suffered during the war years. Not only did the single-theater operators decline in number, but their share of the market shrunk considerably. On the other hand, the audience share of the large national circuits during the period improved significantly. According to information provided by Famous Players to the Royal Commission on Corporate Concentration in 1976, Famous Players grew from 196 theaters in 1929 and 342 theaters in 1947.11 The two chains—Famous Players and Odeon—together controlled 60.8 percent of total box-office receipts in 1947, which is an overwhelming concentration of economic power. No doubt this helped Famous Players sustain itself during the depression years. The contract terms of distributors may also have been lower for the chain during those lean years. But when the industry went into a boom cycle during World War II, the two chains recovered quickly. The smaller independents, on the other hand, without firstrun films, were in an uncompetitive position to start with. Block booking, blind booking, and other restrictive policies contributed to the weakening of their relative position in the market. The worsening economic situation for the independents finally resulted in an open political battle between the major theater chains and the independent theater operators, who were attempting to restore some competition in the exhibition and distribution sectors of the film industry.

Independent Exhibitors Retaliate The independent exhibitors had complained to the government about their deteriorating economic picture. As shown in Chapter 2, the Combines Investigation Act and the courts had not altered the industry structure in any way. The oppressive situation in the motion picture market was not going to be tolerated by independent exhibi100

Table 2 Market Share for Large Chains and Single Theaters, 1937 and 1947 Chains

1937 1947

Single Theaters

Percentage of all theaters

Percentage of total boxoffice gross

Percentage of total audience

Percentage of all theaters

Percentage of Total boxoffice gross

Percentage of total audience

24.6 23.7

53.6 60.8

48.4 57.0

54.3 52.8

28.7 18.4

31.9 21.0

Source: Canadian Film Weekly, December 1, 1948. Note: Chains are defined as twenty or more theaters controlled by one company. Boxes do not add up to 100 because data with respect to chains consisting of between two and nineteen theaters were not available and hence not included.

Canadian Dreams and American Control

tors any longer. Many of them fought bitterly against the Famous Players and American film industry cartel throughout the 1920s and 1930s. Several such cases of resistance, particularly the Fraser and Rialto theater cases in British Columbia and Rousson-Trudeau cinemas in Ontario, have been documented.12 However, there was no organized movement on behalf of the independents across the country prior to 1942. Some exhibitors' associations were organized across Canada, some representing local companies and most of them inactive as they included chains and independents. While the American distributors and Famous Players acted in unison through the Cooper Organization and penetrated the associations to render them ineffective, the independents had no organization of their own to represent their interests. In 1935, N. A. Taylor formed the Independent Theatres Association in Ontario, but the members and the officers of that association had business connections with Famous Players. Taylor himself was a partner of that company. Consequently, it did not earn the confidence of the independent exhibitors. In the World War II years, the interventionist posture of the Canadian government resulted in independent exhibitors organizing a lobby to protect their interests. Because of the extraordinary situation in the country, provincial and federal governments in Canada made unprecedented interventions in the motion picture industry. They also sought the industry's assistance to get their war propaganda movies made and shown. The federal government authorized a 20 percent amusement tax on the price of theater tickets. Because of the severe restrictions on building new theaters, Famous Players and Odeon were forced to cut back on their development plans. With rising attendance during the war, the independents prospered despite their problems. The government's Wartime Prices and Trade Board was created to regulate prices and set ceilings on ticket prices; they even canceled some shows to save electricity. R. C. McMullen, the director of the Theatre and Film Section of the board, also set a ceiling on film rentals and guaranteed that exhibitors would share product on a pro rata basis. This was a major policy intervention by the Canadian government, something that had not happened since the aborted combines law action of 1932. It was a direct blow to the American distributors' monopoly control of the Canadian film industry because, if the board were to succeed, the control of the market would shift from the American distributors to the Canadian government. Cooper, representing 102

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the U.S. distributors, and Fitzgibbons, representing the major circuits, brought heavy lobby pressure on McMullen to stop him from altering the distribution market in any significant way. The board afforded the independents a forum to persuade the government to remedy the past and present monopoly restrictions. It was the independents' golden moment. To counter the lobby of the dominant corporations, the independents organized a new exhibitors' association, the Independent Motion Picture Exhibitors Association. It held its first meeting in Toronto in January 1942. More than forty exhibitors, none of whom was affiliated with the large circuits, attended the meeting and elected Barnett E. Laxer as president. Laxer ran theaters in Kingston and Oshawa, Ontario. He found out that McMullen did not want to deal with provincial associations but only national organizations. Consequently, the National Council of Independent Exhibitors of Canada was formed to deal with the Wartime Prices and Trade Board. Laxer was also instrumental in setting up a Quebec group, the Independent Exhibitors Association of Quebec, in April 1942. This was in opposition to Quebec Allied Theatre Industries, which included Famous Players and its affiliates. Laxer's next move was to produce a pamphlet describing the adverse conditions faced by the independents, which was titled "Memorandum of the National Council of Independent Exhibitors of Canada to the Wartime Prices and Trade Board and to James Stewart, Its Administrator of Services." Provincial associations from Nova Scotia, Ontario, British Columbia, Saskatchewan, Alberta, Manitoba, and New Brunswick signed the memorandum, dated March 26, 1942. It was later published as a booklet and widely distributed in the industry. The booklet charged with force: Independents are being driven out of business at an unprecedented rate, while the surviving ones with good theatres are in danger of extinction. Finding the avenue of theatre construction closed, the Chains have turned to the independent territory for extension in Canada. The weapon now employed by the Chains for absorbing Independent theatres is that of taking away their pictures, or as it may be otherwise stated, worsening their product for Independent theatres, by depriving them of the pictures of certain producers, by selecting the top bracket pictures, leaving the poorer pictures to the Independents, by taking away their runs of particular producers, in short, by overbuying. The attitude and conduct of the Distributors and Chain exhibitors appears to be one of disregard of the Government's plan and purpose as shown in its Wartime Prices and Trade Board measures. . . . The 103

Canadian Dreams and American Control

seeming intention of the Distributors and Chains is to pursue their business as if no Wartime Board had come into being.1

The booklet also criticized McMullen for allowing the chains and the distributors to lobby him. The reaction to the booklet in the trade press was swift and fierce. Ray Lewis, the editor of Canadian Moving Picture Digest, attacked the independents' public debate as treasonous: [Why] in such a time as this, when all right-thinking men and women are directing their thinking, their man and woman-power towards a War effort, that a group of motion picture exhibitors should spend energy, time and man-power in kicking the Canadian Motion Picture Industry in the pants, instead of Hitler. . . . We have been told, that since the publication of the pamphlet, some exhibitors have withdrawn from the Ontario group. It is very evident that the men responsible for the publication of the information contained in this booklet and its misinformation, definitely dislike motion pictures, save as a business for making money. It is evident that they are not interested in co-operating with the Canadian Motion Picture War Services Committee in its effort to unite the Industry for War Services; and it is also evident that they are not appreciative of the opportunity and privilege to remain in business, nor are they intent on making the titanic task of the Government in this War Emergency any lighter by leaving the Government free from internal industry disturbances, to carry on the business of the war. 4

Furthermore, Ray Lewis refused to reprint anything from the booklet, or even to paraphrase the changes leveled against Famous Players and the U.S. distributors. It is interesting to note that the independents' lobby effort was characterized as unpatriotic, although their booklet attacked foreign distribution companies and their affiliates. It is also ironic that Lewis found fault with the independents' motives. The independents were characterized as money-hungry, whereas the dominant firms in exhibition and distribution were in the business for their love of motion pictures. Canadian Film Weekly stated that the charges were the "most serious ever fired in native inter-industry strife" and went on to predict that "The Booklet, in effect a bombshell, may result in the most violent ruckus ever experienced in the Canadian motion picture industry."15 Ten days later, an editorial pointed out the growing reaction to the booklet within the ranks of independent exhibitors: The full effect of the 32-page booklet. . . which condemns self-regulation today, the circuits and the distributors, is not yet known but already a wave of resentment from Independents and others is being felt about its untimeliness. . . . 104

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No one denies that there is a certain amount of justice on the side of the Independents. How to obtain it is the great problem to which critics say the Laxer booklet contributes nothing. 16

It seems that the independents were turning against Laxer and his association. Whether the Lewis attack on Laxer had something to do with it, or whether they were given material inducements (e.g., better films or terms by the U.S. distributors), is not common knowledge. The two chains reacted swiftly by setting up a new exhibitors' organization, one that also included the independents, which was an old strategy of cooptation. Taylor's Independent Theatres Association was renamed as the Motion Picture Theatres Association of Ontario at an annual meeting in September 1942. Taylor was a partner of Famous Players at the time. Ray Lewis did not lose any time in approving the new unrepresentative organization: "We think it is an excellent idea to form such an association as we are of the opinion that an exhibitor is an exhibitor, regardless of whether he belongs to a circuit or is operating one or more theatres independently."17 At the first annual meeting of the association, held on December 1, 1942, sixty-five members attended. Although the elected board was headed by an independent, it was dominated by Famous Players and Odeon associates—N. A. Taylor, Herb Allen, Sam Fine, and H. M. Masters, to name a few. The 1946 annual meeting of the association was attended by one hundred members, representing 306 theaters, including 102 independents. Fitzgibbons, president of Famous Players, spoke to the meeting, suggesting that industry differences should be resolved privately.18 The Independent Motion Picture Exhibitors Association vanished, and the militant independents were destroyed as a force in the industry. The Motion Picture Theatres Association of Ontario continues to represent exhibitors today. The Wartime Prices and Trade Board had no effect on distribution of films at all. Thus, another attempt by the independents to seek government intervention in dealing with the American distributors' control of the Canadian motion picture industry had failed.

Vertical Integration with Great Britain The Rank Organization of England, a vertically integrated corporation, was attempting to break into the U.S. and other markets controlled 105

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J. Arthur Rank (second from right) being received by/Canadians. (From Canadian Picture Pioneers, Gold Book, no. 2/courtesy of C. R. B. Salmon.) by the American majors in the early 1940s. The American film industry's integration with the two largest Canadian circuits had made it increasingly difficult for British films to enter the Canadian market. Rank solved the problem by buying a 50 percent interest in Odeon, which was one hundred theaters strong in 1945. With its new connection to Britain, Odeon consolidated its position in eastern Canada through partnerships with theaters owned by A. I. Garson in the Maritimes and those of Superior Operating in Quebec.19 Rank's films would now appear on Canadian screens managed by Odeon Theatres.20 Paul Nathanson, N. L. Nathanson's son, had become president and managing director of the Odeon circuit after his father's death in 1943. He resigned from the Odeon board of directors and sold his 50 percent share to Rank in April 1946.21 Thus, Odeon became a 100percent-owned subsidiary of Rank. By 1948, the Odeon circuit grew to 180 theaters, almost doubling its size since integration with Rank. The new Odeon board was largely in Canadian hands, but its policies 106

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J. Earl Lawson, president of the J. Arthur Rank Organization of Canada. (From Canadian Picture Pioneers, Gold Book, no. 2; courtesy of C. R. B. Salmon.) were hardly beneficial to Canada. J. Earl Lawson was appointed president of the board in 1946. Lawson had been a prominent figure in Canadian politics. He was a member of the cabinet under R. B. Bennett and a member of Parliament until 1940, when he retired from the House of Commons. Rank possibly wanted a man of power and influence in Ottawa to run its circuit in Canada rather than an old theater hand. Some prominent Canadian industrialists—including D. C. Coleman, the president of Canadian Pacific Railway, and R. V. LeSueur, president of Imperial Oil—were on the board. Leonard W. Brockington of Ottawa (Rank's Canadian lawyer) and George W. Peters (Odeon employee) were the other Canadians on the board of directors.22 Rank's primary goal in acquiring Odeon was to secure a portion of the market for its own productions from Great Britain. Odeon's predominantly Canadian board served that end well. Canadian control of the board did not result in any investment in 107

Canadian Dreams and American Control

films produced in Canada. Practically no Canadian production companies making feature films in Canada existed, so the question of providing their films access to theaters did not arise. Although Rank did not finance any Canadian films, it did some location shooting work in Canada and often used the Queensborough Studios in Toronto. Two such films were Campbell's Kingdom, which was set in Alberta, and Little Kidnappers, partly shot in Nova Scotia. They were believed to be commercially successful.23 The Odeon board, although controlled by Canadians, served Rank's interests, just as Famous Players served its parent company in the United States. Rank was able to control a part of the Canadian first-run market as long as its studios in Britain produced films. This ended abruptly with the economic decline of the Rank empire in 1948 as a result of its inability to penetrate the U.S. market.24 Rank's position did not improve until the mid-1950s. This required Odeon to rely more on American distributors for its supply of films. The benefits for the British film industry of vertical integration with a portion of the Canadian theatrical market ended, although officially Rank still held control of Odeon.25

Relations between Famous Players and Odeon What was the relationship between the two seemingly competing theater circuits? Did the timid giant Odeon alter the market in any way? As indicated in the statement made by George Destounis of Famous Players, there was hardly any bidding for films from different U.S. distributors. The exclusive right to play a certain distributor's films eliminated any possible competition in the distribution market. This did not mean that there was no rivalry between the two circuits for audiences in various cities and towns where they ^vere in competition with each other. However, there seemed to be no real competition for films as evidenced in this report printed in Variety on April 10, 1946: An "entente cordiale" between Famous Players-Canadian and Odeon, Canada's two top theatre circuits has been set up to eliminate competitive bidding for product, according to indications reaching major U.S. distributors. With Canadian box office strong, the circuits have discovered, it is said, that there was considerably more profit to be made by not pushing up prices for profit by bidding against each other. . . . 108

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Arrangement—tacit or otherwise—between Odeon and Famous Players-Canadian has come to light with efforts of U.S. companies to make deals on their product. They have discovered, they say, that if Odeon refuses a contract because of terms and a sale is then attempted to Famous Players—Canadian, the answer is automatically a nix. And vice versa. With Canadian rentals so satisfactory and apparently nothing to be gained by any public squawk against the alleged Odeon—Famous Players—Canadian entente, major distributors are just swallowing their annoyance and keeping quiet. No action of any sort is planned.

Not only was there no competition between the two circuits for films, but, as the report states, the circuits often acted as partners faced with economic downturns in the industry. The mid-1950s slump was one such occasion. In 1950, a peak year for the Canadian exhibition industry, the 1,801 regular theaters and 62 drive-ins sold 236 million tickets, which was a record. Ten years later, the total number of paid admissions fell by 60 percent to 117.7 million. This downward trend continued until the late 1960s, when theater attendance stabilized with more young people coming to theaters for entertainment.26 During this economic crisis, the two chains set up a committee to decide which of their theaters would be closed. Famous Players had controlled 419 theaters in 1954, but it had closed 143 theaters by 1965.27 The two chains acted as though they were partners, sharing profits and losses. Their goal was to survive the crisis. Confirming such arrangements between the two chains, C. R. B. Salmon, president of Odeon Theatres, said, "It was a monopoly, you could say, but the prices did not go up and the public did not suffer."28 The committee overseeing the closure was abandoned in the late 1960s as theater attendance was once again on the rise. The growing popularity of television throughout the 1960s created a great deal of uncertainty in the U.S. and Canadian motion picture industries. The corporate executives at Paramount decided to keep their hands in the broadcasting industry, which they correctly perceived as a threat to the feature film industry. Famous Players Canadian Corporation had entered into the broadcasting business in Canada as early as 1954 by investing in television stations in Kitchener, Ontario, and Quebec City, Quebec. By 1970, it held stock interest in six television stations, two radio stations, and twenty-one cable companies, all in Canada.29 Famous Players initiated a program of establishing community antenna television systems throughout Canada. Fitzgibbons, president of the company at the time, declared after obtaining the exclusive franchise 109

Canadian Dreams and American Control

for pay TV from International Telemeter Corporation, a Paramount subsidiary in the United States, "Telemeter was a means of keeping the flow of revenue to Hollywood so necessary to motion picture production."30 Once again, control of the new medium was essentially a means to transfer profits from the Canadian pay-TV market to the American film studios rather than investing in local production of films. Odeon made no such investments in television in Canada.

Conglomeration and Ownership Changes The absorption of some of the major American film producerdistributor companies by U.S. conglomerate corporations in the 1960s also affected Canada. When Paramount was acquired by Gulf & Western Industries, Paramount's Canadian subsidiary, Famous Players became a part of Gulf & Western's holdings in the leisure industries. Because of Canadian Radio-Television Commission's regulations which required that not less than 80 percent of the voting shares of any company having broadcast property interests in Canada be owned by Canadian citizens, Famous Players was reorganized in 1971. The divestiture of its broadcast interests was necessary for it to keep its American connections intact. Famous Players disposed of its interests in a total of fourteen companies related to the broadcasting business in Canada.31 Gulf & Western (Canada) held 51.15 percent of the total shares of Famous Players Limited, and Canadian Cablesystems Limited (more than 80 percent Canadian-owned) controlled the rest of the shares.32 Since Gulf & Western (Canada) was a wholly owned subsidiary of Gulf & Western Industries in the United States, the American corporation maintained majority control of Famous Players. Importantly, these ownership changes left the historic link of the Canadian theatrical market with Paramount Pictures intact. This, again, was a clear indication of how valuable the theater circuit was to the U.S. production company and its parent corporation. Gulf & Western purchased the rest of the stock in Famous Players in July 1981, by which time the circuit had grown to 437 screens in Canada and an additional 69 screens in France.33 The Odeon Theatres (Canada) Limited, the other major circuit, remained in the Rank Organization's control until January 1977, when that British multinational corporation decided to sell it. The primary reason for the sale was that Rank had ceased to be a film producer. 110

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George Plummer of Mitchell Plummer and Company, Rank's Canadian agent for the sale of Odeon, concurred with this view. He declared that Rank had become involved in a number of diverse, unrelated fields, including North Sea Gas and Oil, Xerox operations in the United Kingdom and other parts of Europe, and major property interests in Canada.34 When Rank's film production interests in Britain were phased out, Odeon Theatres became a free-standing investment, not linked to any of its parent company's other holdings. The logic of large, integrated operations did not prevail anymore in the case of Odeon. The 170 screens that comprised Odeon Theatres carried an asking price of $30 million, with several conditions, such as non-Canadians being discouraged from bidding and commitments to retain most of its employees. Michael Zahorchak, a pioneer in the drive-in theater business in Canada, was the successful bidder at $31.2 million. The purchase was financed by the Bank of Montreal. Zahorchak's Canadian Theatres Group consisted of 47 theaters (66 screens) in Calgary, Edmonton, Winnipeg, Montreal, and several Ontario cities. By adding the 131 theaters (170 screens) of the Odeon Theatres circuit, the new chain, Canadian Odeon Theatres Limited, became 178 theaters (236 screens) strong, thus firmly establishing itself as the second-largest theater circuit in the country.35 The Zahorchak family sold Odeon to Cineplex Corporation in 1984. The circumstances that precipitated this and its significance to Canada are discussed in Chapter 7. Although the circuit came to be owned by Canadian interests in 1977, its operation policies continued.

Circuits and Their Power in the 1970s An analysis of the size, profits, and investment policies of the two dominant theater circuits will help explain why the Canadian feature film production sector remained underdeveloped (which will be the subject of Chapter 5). In 1977, of the 1,633 screens in Canada including regular theaters and drive-ins, Famous Players controlled 418 screens and Odeon Theatres operated 236 screens.36 To put it another way, Famous Players controlled 25.6 percent of the total number of Canadian screens, whereas Odeon Theatres controlled 14.4 percent. A total of 40 percent of all the screens in Canada were controlled by the two largest circuits. Ill

Canadian Dreams and American Control

It is not simply the number of screens that established their dominant position but rather their command of first-run American films. The circuits were assured of their powerful position by the ownership and the market relationships they enjoyed with the leading vertically integrated American corporations. Most of the holdings of the two chains were in prime urban markets such as Montreal, Toronto, Vancouver, Edmonton, Calgary, and Winnipeg. The two circuits virtually controlled all first-run houses in the country. Another important aspect of the chains' control was their concentration in Ontario, which was the largest motion picture market in Canada. In 1976, for example, the seating capacity in Ontario was greater than in any other province. Gross receipts from admissions in Ontario were $70,882,000 that year, which constituted 37 percent of total Canadian admission receipts, exceeding the box-office receipts of any other province. Ontario had 30 percent of all screens in Canada—or 480 screens—of which 380 were regular theaters and 100 were drive-ins. According to information made available to the Royal Commission on Corporate Concentration by Famous Players and Odeon Theatres in April 1976, their holdings were the greatest in Ontario. Famous Players had 113 theaters out of 292, or 38.7 percent of Ontario's theaters, and Odeon Theatres controlled 55 out of 292 theaters, or 19 percent of the theaters in that market. Thus, together they controlled 57.7 percent share of the total number of theaters in that market.37 The two circuits increased their holdings in the Ontario market between 1963 and 1976 by 14.7 percent, a considerable figure, which indicated that they were trying to concentrate operations in the most lucrative market of Canada. They left rural communities to be supplied by independent exhibitors. Premier Operating Corporation Limited in Ontario and Rothstein Theatres Limited in Manitoba are such independent chains. As a consequence of their dominant position, the two major circuits collected the greatest portion of the box-office revenue in Canada. Table 3 provides the average per screen gross box-office revenue for Famous Players, Odeon Theatres, and the independent theater operators for the year 1975. Although the two chains controlled only 40 percent of the screens, they collected 57 percent of the total Canadian box-office revenue.38 This clearly indicated their dominant position vis-a-vis the independent theater exhibitors. The latter group, running 979 screens, or more than half again as many screens as the two big chains, shared a smaller slice of the economic pie. If data were 112

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Table 3 Average Per Screen Gross Revenue Shared by Two Major Circuits and Independents, 1975 Circuit Famous Players Odeon Independents13 TOTAL

Gross admission revenue ($)

Number of screens2

Average per screen revenue ($)

70,303,000 50,534,000 90,563,000

418 236 979

168,188.00 214,127.00 92,505.00

$211,400,000

1,633

$129,454.00

Source: for Famous Players, Bryce Commission Papers, April 1976; for Odeon, Auditor's Report, Consolidated Financial Statements—October 31, 1975; other data from Statistics Canada, Annual 63-207, 1976. a

Number of screens is based on 1977 data, 1975 data on number of screens were unavailable. Independents include chains and single-theater operators.

available, one could segregate the larger independent chains and demonstrate that the remaining independents were worse off. Concentration of economic power paid off handsomely to the two major circuits. (The various reasons for this state of affairs with regard to the independents will be discussed later.) The analysis in Chapter 1 pointed out how historically the first-run theaters assumed the most crucial position in the industry, replacing the system of monopoly on stars and craftspeople in terms of their ability to generate maximum revenue. In the Canadian context, it is important to see how the profits from the first-run theaters were invested to understand the relationship between investments of the major theater circuits and the underdevelopment of the film production sector in Canada. Total net profit of Famous Players, which included rental income from real estate, confection sales, and equity earnings in associated companies, in addition to box-office revenues, was $9.45 million in 1978.S9 It is hard to tell what percentage of net profit was from concession sales as the company's annual report does not provide a breakdown of its revenues. However, Table 4 presents data regarding the gross revenue from theater admissions for Famous Players. In a fiveyear period, Famous Players increased its gross theater revenues consistently as a result of the release of such big box-office hits as The 113

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Table 4 Market Share of Famous Players Limited, 1972-1977 Year

Famous Players gross theater revenue ($)

Total Canadian theater revenue ($)

Percentage of total

1972 1973 1974 1975 1976 1977

48,494,000 49,727,000 60,510,000 70,303,000 102,557,165 101,718,868

139,540,000 150,602,000 173,683,000 211,400,000 224,000,000 229,700,000

34.75 33.00 34.80 34.29 45.78 44.28

Source: for 1972—1975, Bryce Commission Papers; for 1976 and 1977, Audited Consolidated Financial Statements filed with Department of Consumer and Corporate Affairs Canada, Ottawa. Note: Gross theater revenue includes confection sales.

Godfather (I and II) and Saturday Night Fever by Paramount. Additionally, the average admission price increase in Famous Players theaters contributed to the overall growth of admission revenues.40 Its share of total box-office revenues in Canada went up by nearly 10 percent of total Canadian theatrical revenues between 1972 and 1977. Thus, Famous Players took 44.3 percent of the national box-office gross in 1977. The profits of Famous Players are largely invested in construction and development of many diversified operations. While Famous Players modernized existing theaters and built multiscreen auditoriums in new urban and suburban locations in Canada, it grew into a multinational enterprise in its own right by investing considerable sums of money in Western Europe. The company declared in its submission to the Bryce Commission in 1976 that it believed "that European countries constitute its best opportunity for future theatre expansion." It acquired a 100 percent equity interest in the Paramount-Opera Theatre, a leading motion picture theater in Paris, on July 3, 1971. Subsequently, it was converted into a five-screen auditorium complex. Famous Players also acquired a 50 percent equity interest in Parafrance S.A., a French company operating forty-seven screens in France. Parafrance was expected to undertake a major expansion program to grow to a one-hundred-screen operation by 1982. Famous Players also owned theaters in the United Kingdom, which were later sold, and it 114

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considered the purchase of an interest in a major theater circuit in Germany.41 Famous Players, through its subsidiaries and affiliated companies, owned 62,150,000 square feet of land in downtown and suburban areas of Canada. It completed several major construction projects developing its real estate holdings. They included the Capitol Square in Ottawa, a fifteen-story office tower; Whitehall Square in Edmonton, a 600-unit apartment complex; North Star Inn in Winnipeg, a 272room hotel; Capital Square in Edmonton, a twenty-story office tower; and Capital Centre in Montreal, a twenty-one story office tower.42 With one exception, each of the company's office buildings and hotel developments incorporated theaters in its design, thus replacing old theaters with office towers or other buildings but still providing for ongoing theater operations. Other Famous Players interests included General Sound and Theatre Equipment Limited, a wholly owned subsidiary engaged in the selling of projection and sound equipment and supplying technical services to the motion picture industry. This company also supplied intercom installations and public address systems for commercial premises, schools, hospitals, and government buildings. Theatre Confections Limited was also a wholly owned subsidiary of Famous Players. It supplied theaters, arenas, amusement parks, and other entertainment centers with complete confection service.43 Because of a voluntary investment program initiated by the Canadian government in the early 1970s, the two circuits began to finance production of feature films in Canada, which will be discussed in Chapter 4. For our purpose, let us consider the actual investment made by the two large circuits in Canadian production. In contrast to the Famous Players investment in real estate and theater enterprises, its investment in the production of feature films in Canada was negligible. In 1973, Famous Players advanced $12,500 for a French-language production. In 1975, it financed two French-language productions totaling $70,000. In the same year, it had advanced a total of $270,000 for six English-language feature films. In 1976, Famous Players had committed a total of $599,540 for fourteen pictures in both languages.44 Between 1973 and 1976, the company's total investment in Canadian film production amounted to $3,178,000. Its recoupment from films that obtained theatrical release totaled $554,OOO.45 A stark contrast is evident in Table 5, which summarizes the rentals Famous Players paid to the American majors in the years 1970 to 1975. It is 115

Table 5 Film Rentals Paid by Famous Players to Major Distributors, 1971-75 1971 ($)

1972 ($)

1973 ($)

Fox

1,389,894* 1,252,706 383,748 2,670,401

3,638,048 2,761,822 712,863 1,314,465

1,144,574 2,302,052 589,316 2,750,882

3,554,731 6,042,606 1,542,125 2,591,484

6,983,615 2,953,884 4,787,214 4,067,206

TOTAL ($)b

5,696,749

8,427,198

6,786,824

13,730,946

18,791,919

Paramount Warner Bros. United Artists

1974 ($)

1975 ($)

Source: Bryce Commission Papers, Exhibit E. a

Numbers have been rounded off. MGM films were being distributed at this time by United Artists. The other majors, Columbia and Universal, released their pictures on the Odeon Circuit. b

Grand total for five-year period 1971-1975 was $53,433,636.

In the Shadow

estimated that Canada contributes approximately 10 percent of the gross theatrical rental revenues earned by the American majors in the U.S.-Canada market. The revenues shown in Table 5 provide a partial picture of the revenue outflow from Canada into the United States, which are in turn used in the production of features and other activities of the majors. In the years 1971 to 1975, Famous Players extracted $53,433,636 from the Canadian theatrical markets on behalf of the American majors. At the same time, Famous Players' invested around $3 million in domestic Canadian film production. Clearly, its central purpose was not to support film production in Canada but to supply profits to the American majors from the Canadian film exhibition industry. The financial details of Canadian Odeon Theatres are sketchy at best. Odeon's gross revenues were $23,246,000 in 1971. They had more than doubled to $50,534,000 by 1975.46 It should be noted that Odeon's box-office revenues for 1973 were $25.9 million, or 17.2 percent of the total Canadian box-office receipts for that year.47 Although Odeon was a wholly owned subsidiary of the Rank Organization, Rank's feature films contributed only about 5 percent of Odeon's theatrical box-office revenue, while the rest was from the U.S. companies.48 Between 1975 and 1976, Odeon invested a total of $500,000 in four Canadian feature films.49 While it argued in its brief to the Bryce Commission that it was "assisting in the development of a viable Canadian film production industry," by 1977 Odeon withdrew from the voluntary investment program in Canadian films.50 Odeon's ownership changed hands in January 1977 when it was bought by the Zahorchak family, a privately held corporation. Apparently the new owners felt the Canadian government could not pressure them to invest in domestic film production as the company had done in a minor way when it was owned by a transnational corporation. Its chairperson, C. R. B. Salmon, stated, "We are in the business to show movies but not to make them ourselves."51 It is interesting to see how Canadian ownership ignored its responsibility to create a genuinely Canadian film industry in the country. But such was the nature of national capital in Canadian film, television, radio, and other cultural industries. Canadian business, as it had done historically, was satisfied to be the middle agent between American producers and Canadian audiences in the interest of quick and guaranteed profits. It strongly believed that it owed nothing to Canadian talent or to Canadian people at large except for brokering American culture. 117

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Table 6 Allocation of First-Run Feature Films by the Majors to the Two Principal Theater Circuits

Metro-Goldwyn-Mayer Paramount United Artists Warner Brothers Twentieth Century— Fox Columbia Universal

Famous Players (%)

Odeon (%)

100 100 100 100 66.66

—

—

— — 33.33 100 100

Source: C. R. B. Salmon, interview, Toronto, November 15, 1978.

Relations between Majors and Circuits in the 1970s The basic structure of the industry remained intact since the 1920s. Although the British film industry attempted to vertically integrate with a junior theater chain in Canada, it was a short-lived alteration of the market structure. The leading vertically integrated American producer-distributors in Canada were Columbia Pictures of Canada, Metro-Goldwyn-Mayer, Paramount Film Distributing (Canada), Twentieth Century-Fox Film Corporation, United Artists Corporation, Universal Films (Canada), Walt Disney (Buena Vista), and Warner Brothers Distributing (Canada). As our analysis has shown, the first-run film allocation policy of these companies had been developed over a long historical period which is summarized in Table 6. The net effect of the policy of product allocation was twofold: the circuits had the right of first refusal, and in exchange for that they surrendered their total playing time (screen time) to the American producer-distributor companies. As we have seen so far, they were mutually beneficial but devastating to the fragile economic position of the Canadian-owned, unintegrated enterprises. However, some minor internal shifts in the distribution and exhibition structure had occurred. In 1975, Universal stopped allocating its first-run films to Famous Players and switched them to Odeon. In the same year, United Artists moved from Odeon to Famous Players.52 Until July 1, 1979, Bellevue Films, a Canadian-owned company, distributed Walt Disney Company's feature films. Disney then moved its franchise to Paramount Films Distribution (Canada), probably to gain 118

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better access to the Canadian market through Famous Players.53 The chains claimed that the shifts indicated a certain level of competition between the distributors and exhibitors. What the chains failed to point out was that the shifts were internal to the system of relations between the majors and the circuits. The allocation policy of the American majors of their first-run films to the two circuits had not changed since 1941, despite such minor shifts. Furthermore, they were not easy to make. Wayne Case, president of Columbia Pictures of Canada, stated, "Changes cannot be made, even if, for any reason, Columbia wished to switch. Famous is totally booked up with commitments from other major companies and probably couldn't handle the additional business. Every one is locked into the system without much margin for maneuvering."54 Case was pointing to the central problem in the Canadian motion picture industry: the monopolization of screen time by the American majors. If Columbia, one of the majors, complained about the monopoly situation in the Canadian theatrical market, it is not hard to imagine the plight of Canadian producers in getting access to first-run theaters. (More will be said on the problem of access later in this chapter.) The practice of sharing the films of one or more suppliers by competing theaters in a market in an agreed manner, known as product splitting, occurred only in the case of Twentieth Century-Fox. Being an anticompetitive practice, it has been declared illegal in the United States under the antitrust laws, but not in Canada.55 Until about 1975, the split occurred on the basis of number of films distributed by that company in any given year, but that was found to be unfair to Odeon. Consequently, Odeon renegotiated with Fox and Paramount, and the system was changed. Canada was divided into three geographical regions or markets—Toronto, Vancouver, and Montreal. A split picture would alternate between Famous Players and Odeon theaters in those markets. If a picture played Famous Players theaters in Vancouver and Montreal, it would play at an Odeon theater in Toronto. The next Fox picture to come along would play in Vancouver and Montreal on Odeon's screens, and in Toronto ItTwould be screened by Famous Players. This product allocation policy for split pictures was characterized by Odeon's president as being a fair distribution of revenues between the two major circuits.56 The net result of the booking policy practiced by the American majors was the monopolization of the first-run Canadian market. When I asked the chairperson of Odeon Theatres whether the leading U.S. 119

Canadian Dreams and American Control

film producers offered him one or two potentially successful films and ten inferior pictures as a package, he replied: No, it's not. . . done quite as blatantly as that. But when he conies along, I mean, he might say this afternoon I want to come see you, we will make a deal for Jaws, and I have got another half a dozen duds in my bag and you can't have Jaws without them. It's not done quite as rudely as that. But they may be sold quite separately, but if you don't want them, if you tell him I don't want them, we have had Jaws and we have done very well with that. Come see me next time when you have a good one. He will just say, look chum, I am not going to see you next time when I got a good one. You want my next good one, you look after these, which you know is fair enough.57

This method of distribution was essentially block booking. It not only created a minimum market for lower-grade pictures but also occupied any playing time on the major circuits that may have become available to the independent Canadian producers. Through their block-booking policy, the leading American producerdistributors controlled almost all of the screen time available in the Canadian first-run market. They thereby recieved the lion's share of the film rental income. In 1977, among the eighty-three distribution companies operating in Canada, the eight largest corporations—all of them subsidiaries of American distributors—took in 77.8 percent of the total rental income.58 They paid 67.1 percent of their gross rental income as royalties to the producers of films they distributed.59 No Canadian producer received any royalties from the eight companies. Canada has been a lucrative market for the American majors and the available data point out that Canada's importance as a market for American films has steadily grown. Between 1963 and 1977, gross rental billings in the Canadian theatrical market by the majors rose by 400 percent from $16.8 million to $64.3 million (U.S.).60 As indicated in Table 7, there was a marked increase in rental billings to $111 million by 1984. Canada slipped from its long-held "distinction" as Hollywood's number one market to the third position in the top fifteen markets by 1986. The majors's rental revenues, however, expanded in the top fifteen markets by 30 percent between 1985 and 1986, while domestic revenues rose by only 5 percent.61 This is indicative of how crucial the foreign markets are for the American production and distribution companies. Canadian filmmakers and distributors did not profit from any of these changes, and in fact their position worsened. 120

Table 7 Gross Rentals from Top Foreign Markets for American Majors, 1974—1986

Argentina Austrailia Belgium Brazil Canada France G. Britain Italy Japan Mexico Netherlands S. Africa Spain Sweden Switzerland Taiwan Venezuela W. Germany

1974

1975

1976

1977

1978

1979

1980

1981

1982

38.1

1.7 37.5

3.2 28.7

8.8 26.1

14.8 40.2

17.6 40.1

27.3 42.4

22.2 63.2 54.6 37.8 56.4 56.7 17.0 7.9 19.5

25.4 60.8 51.9 37.1 45.0 52.2 21.0 9.5 11.2

21.2 64.3 46.5 36.1 39.6 48.9 18.1 9.4 11.8

23.2 77.6 95.4 72.2 55.8 95.4 28.1 17.5 13.7

26.5 75.0 80.8 79.4 58.9 80.8 27.9 17.1 17.3

19.5 91.5 88.9 86.3 55.1 76.6 34.5 15.1 20.8

15.2 51.3 10.4 20.0 88.7 83.0 76.6 41.0 68.5 40.4 14.4 18.3

3.7 44.7 9.5 19.3 99.8 71.6 51.9 43.6 54.5 23.0 9.1 15.4

13.4 8.0 —

9.1 8.0 —

45.7

41.3

10.4 8.9 — 9.7 51.7

16.0 11.6 — 12.9 70.0

21.5 15.4 — — 97.1

21.5 14.2 — — 88.5

17.4 12.0 — 11.7 77.6

10.3 11.8 — 10.2 60.2

16.7 54.4 35.0 36.5 47.7 37.1 — 16.8 — — — — 35.0

Source: Motion Picture Export Association of America, as reported in Variety, various issues. Note: Amounts shown are in millions of U.S. dollars.

1983

1984

1985

1986

44.8 10.7 15.5 91.0 81.3 49.7 48.4 102.4 17.8 — 15.3 39.4 13.8 13.9 10.6 — 66.2

33.0 8.2 11.4 111.0 69.5 35.0 40.0 77.0 17.6 — 11.2 33.1 10.5 10.2 8.0 — 48.0

28.8 5.1 4.9 75.5 50.2 41.2 31.0 74.9 16.2 — — 24.6 13.0 7.4 7.9

27.4 13.8 24.5 86.8 98.5 49.1 64.6 102.6 13.5 14.7 — 48.2 17.1 13.9 12.5 — 64.7

48.5

Canadian Dreams and American Control

The role of Paramount Pictures Corporation has been significant in Canada. As shown earlier, Famous Players was created by Paramount as a dominant theater circuit in Canada. Paramount's control over the Canadian box office did not diminish even in the 1950s. According to one estimate, 52 percent of all film rentals leaving Canada for the United States went to Paramount in 1952.62 Although that share was substantially lower in the 1970s, Paramount collected more rental from Famous Players than any other major U.S. distributor between 1971 and 1975.63 In the past, the majors have contended that 50 percent of their theatrical revenue came from outside the United States. However, 82 percent of Paramount's theatrical film rental revenue in 1978 was derived from the U.S.-Canada market.64 The American majors were able to extract the largest share of Canadian theatrical revenues because of their market relationships with the two dominant circuits. The industry structure, on the one hand, produced a disproportionate share of revenue to the eight American firms and, on the other hand, rendered the independent Canadianowned enterprises in exhibition, distribution, and production of feature films vulnerable to their competition. The market relationships between the independent sectors of the industry and the dominant distributors and exhibitors in Canada are examined below.

Relations between Independent Exhibitors and Majors in the 1970s Although independent exhibitors in Canada operated about 60 percent of all screens in the country,65 their buying power was weak when compared with the dominant circuits. The independents were scattered throughout the country, and they were an insignificant group in such large markets as Toronto and Vancouver. A prime example was the Ridge Theatre in Vancouver, which operated as a community theater, published a monthly schedule of films, and offered special services such as a "crying room" for babies; it played second-run films. In smaller cities and towns where independents operated in competition to the theaters affiliated with the dominant circuits, the independents did not get any first-run films from the majors. As a matter of policy, the majors did not offer first-run films to independents in the same markets where either of the two major circuits were represented. 122

In the Shadow

Rocca's Challenge The general picture just described should not be mistaken for acceptance of the economic relations by all independent exhibitors in Canada. Just as Barnett Laxer had tried in the early 1940s through the Independent Motion Picture Exhibitors Association, a small-theater chain owner in the Maritime provinces, Rocca Cinemas Limited, challenged the industry structure in the 1970s. On February 24, 1975, John P. Rocca, the president of the company, filed a complaint of unjust discrimination with the Nova Scotia Amusements Regulation Board, citing Bellevue, Astral, Paramount, United Artists, Warner Brothers, Universal Films, and Twentieth Century-Fox. Bellevue Film Distributors and Astral Films Limited were both Canadian-owned companies. Bellevue controlled the Disney franchise, and Astral marketed all the films from Rank Pictures of England and Avco Embassy Pictures from the United States. Rocca's claim of unjust discrimination by the distributors in not allocating first-run films to his theater was based on the Nova Scotia Theatre and Amusements Act.66 Section 18 of the act was specifically aimed at regulating the market conduct of distributors against exhibitors: If any film exchange shall knowingly or willfully make or give any undue or unreasonable preference or unfair advantage to any theatre owner or shall subject any theatre owner to any undue or unreasonable prejudice or unfair disadvantage in any respect whatsoever, such film exchange shall be deemed guilty of unjust discrimination.

In a press release, Rocca stated: While in New Brunswick, we have been successful in obtaining some first-run films, although not a share of the top films. In Halifax, the situation is different. All the major distributors have refused to offer us a single first-run film, good or bad. . . . Two distributors told us they had an arrangement with Famous Players Ltd. whereby all their films would be played by these exhibitors. Most of the other distributors told us that was the best they would do for us.

The board instituted an inquiry on May 13, 1975, with R. B. Kimball as the inquiry officer. After nearly three years of public hearings, Kimball submitted his report and recommendations to his superiors. The testimony presented at the hearings reveals how the structure of domination continued to operate in Canada. Starting in 1973, the Rocca Group Limited, which was a real estate 123

Canadian Dreams and American Control

developer, built a total of five theaters (fifteen screens) in the Maritime provinces, all of them in shopping malls, including the Spryfield Cinemas in the Halifax-Dartmouth area. Spryfield, a twin-screen theater, was located in a suburban shopping mall. Prior to 1950, there were a number of independents in the area in addition to the Famous Players theaters. When the Odeon circuit emerged in the 1940s, it absorbed some of the independents. The Franklin-Herschorn circuit had survived the audience declines in the 1950s resulting from the popularity of television. It was, however, a second-run theater circuit. The smaller chains were simply unable to obtain first-run films given the buying power of the two major circuits, their ownership, and other ties with the American majors. The Franklin-Herschorn circuit was acquired by Famous Players in the 1970s, and some of its theaters (Dundas and Mayfair) were closed. Until the Rocca Group built the Spryfield Cinemas in 1974, Famous Players and Odeon operated all the theaters in the Halifax-Dartmouth area. There were a total of fifteen regular screens and one drive-in theater; eleven were controlled by Famous Players, three by Odeon, and two by Rocca. The seating capacity of the theaters ranged from 210 to 950, with Rocca's Spryfield Cinemas having 392 and 378 seats.67 Rocca not only built his theaters in a market that was tightly locked up by the two national circuits, but he tried to establish himself as an equal with them in an unequal situation. No independent exhibitor had tried to do that before in Nova Scotia. Rocca personally met with various U.S. distributors in 1973 to persuade them to supply a share of first-run films to the Spryfield Cinemas. The theater opened on November 20, 1974, with Benji, a firstrun release of a distributor not named in the inquiry. But first-run films from the majors on a regular basis were not forthcoming. In a letter dated July 29, 1974, Rocca requested that the major distributors of first-run films treat him as they treated his competitors, the two major circuits: The purpose of this letter is to request a fair and equitable distribution of your 1975 product which will be available for release in the HalifaxDartmouth area for the year 1975 and in the Toronto area from its opening date until the end of 1975 and every year thereafter. We are not requesting titles or that you give our theatre consideration when you decide where your product is going to play. We are asking for a firm commitment that whatever product will be available during 1975 at those locations will be distributed by your Company on a fair and 124

In the Shadow

equitable basis among the theatres presently in those locations and our theatre.68

Rocca was not begging for supply, which he knew would be denied, but demanded a three-way split of all the majors' first-run films between his theaters and those of Famous Players and Odeon. Essentially his strategy was aimed at forcing himself as an equal competitor to the circuits, but he failed. All that Rocca was able to secure were films from various independent distributors, predominantly sexploitation pictures. Such films did not enhance his theatres' reputation. He could have played the majors' subsequent-run pictures as all the other independents before him had done. But knowing where the profits were, Rocca demanded first-run films on an equal footing with the two large circuits. According to Rocca's financial consultants, the Spryfield Cinemas would have made a profit of $100,000 on its first year of operation if Rocca's plans to make it a first-run house had materialized. However, for the year ending December 31, 1975, there was a net loss before administration expenses of $65,638.69 The main obstacle to the anticipated success of the Spryfield theater was the refusal of all the named distributors to supply first-run product on a regular basis. The inquiry officer stated: I am, however, satisfied that none of the Respondents were willing to provide the Complainant with first run film product at its Spryfield Theatre at the time of its opening, and this unwillingness, with the exception of United Artists and Paramount Pictures Corporation (Canada) Ltd., continued up to the laying of the complaints.70

Even Paramount and United Artists, who had each offered a first-run film, never agreed to supply them on a regular basis. Warners offered some first-run films after the complaint was filed, but Rocca refused to play the majors' films unless they guaranteed him a share of first-run product just as they did for Famous Players and Odeon. The thrust of the arguments presented by the respondents during the hearings was that the Spryfield Theatre did not have a track record of box-office grossing potential, unlike its competitors in the same market. The distributors argued that they had adopted a policy of refusal to supply first-run films only because of its history. However, the inquiry found that none of the distributors offered any first-run films to the Spryfield Theatre at its opening, which precluded its acquiring a good reputation. It could not demonstrate an acceptable grossing capability given the absence of majors' first-run films. The 125

Canadian Dreams and American Control

respondents' argument camouflaged their historic marketing arrangements with the major circuits. The defense was able to extract testimony to the effect that the majors had offered first-run films to another theater in the same market with no track record because it was leased by Famous Players. For instance, the Eve Theatre in downtown Halifax, which played hard pornographic pictures, changed its name to Cove after it was leased by Famous Players. It was renovated and reopened with a Warner hit film, The Exorcist. A theater with an Xrated track record could obtain first-run films from the majors only because of its connection to Famous Players, which was one of their principal customers in Canada.71 Rocca's Spryfield Cinemas was singled out for discrimination because Rocca demanded equal treatment in a situation that favored the most powerful exhibitors. The weakness of the distributors' argument was recognized by the inquiry officer, who concluded: Since all of the Respondents, with the exception of the abovementioned two Respondents (and neither offered any valid reason for the lateness of their offers) were unwilling for the reasons stated above to offer any first-run product to the Complainant at any time during the period covered by the complaints, I would have no hesitation in finding each guilty of unjust discrimination were it not for the following circumstances.72

The inquiry officer held that Rocca was not entitled to a supply of first-run product on a long-term basis because it was not proven that his opponents were given any such commitment by the respondents.73 Rocca's attorney could show systematically how a certain historical pattern of product allocation existed in the Halifax theatrical market which favored the two circuits. But he could not demonstrate that the American distributors were legally bound to give their first-run films to Famous Players and Odeon. The inquiry officer found that Rocca was uninterested in obtaining first-run films to demonstrate the grossing potential of his theaters so that the distributors would have a reasonable basis to continue or end such supply to him. Rocca's demand for an equitable share of first-run films in 1975 and "every year thereafter" was not supported by the Nova Scotia law. According to the inquiry officer, Section 19.1 of the law applied to the number of films and not the quality of films.74 He found Twentieth Century-Fox in violation of Section 15.1 of the act, which required a provincial license to market motion pictures in Nova Scotia. But Rocca's complaint did not proceed on that basis.75 The inquiry officer recom126

In the Shadow

mended to the board that no action be taken agains the distributors named in the complaint. The case indicates that despite the apparent absence of written agreements between the major distributors and the major circuits in Canada, the mutually beneficial business "understandings" were in fact their policies. In a judicial inquiry of this sort, historical patterns of corporate behavior and policy as well as policies of corporations in other provinces did not have any legal bearing. Rocca lost the case, not because he could not prove that he was discriminated against by the majors but because he demanded a long-term commitment from the distributors which would have put him on an equal footing with the major circuits. In essence, Rocca challenged the system of monopoly control in the Canadian motion picture industry and demonstrated once again that the legal means available to the independents in Canada were inadequate in dealing with the overall market structure that excluded them. Four months after their defeat in the Nova Scotia Amusements Regulation Board, the Rocca Group left the exhibition business entirely by selling their theatres to Empire Theatres Limited, another regional company. The Roccas were able to challenge the American majors and their allied circuits in Canada because they had the financial means to do so. But there were many smaller independents who did not have adequate financial resources to go through the already weak legal system to redress the monopoly abuses in the industry. A letter printed in the Montreal Gazette on February 10, 1976, written by an independent exhibitor commending some eight individuals who had requested a combines investigation inquiry into the motion picture industry, attested to that fact: I congratulate you on this action. It is about time this was done. Many small, independent theatre owners have suffered because of these practices for many years, but taking legal action was a step beyond their means. I, myself, have been in the indoor theatre and drive-in business for thirty years and have experienced discrimination from the various film companies. . . . I have thought about suing Odeon Theatres Limited and the film companies, but, as I previously mentioned, this is a very expensive proposition and would create problems for me that could put me into bankruptcy. . . . I feel that I would be able to give you a lot of information and proof in respect to the discrimination shown by the film companies in favour of Odeon Theatres Limited and Famous Players Theatre Limited and against small, independent theatre owners. 127

Canadian Dreams and American Control

Minor Victories for Independent Exhibitors Charles Knapp, another independent theater operator, tried to thwart the monopoly power of the dominant companies in Canada, but failed. This case led to the conviction of Columbia Pictures Industries of price maintenance under the Combines Investigation Act. I will return to the reasons for the revisions to the act in 1976 and the implications for the Canadian film industry in Chapter 7. Although limited in its scope, the case and the evidence presented at the court by the government reveal how the distributors wield their power with the independent theater operators. In March 1976, Jack and the Beanstalk, a first-run film distributed by Columbia, played simultaneously at the Bijou Theatre in Scarborough, a suburb of Toronto, and certain Odeon theatres in the Toronto market. The practice of an independent screening a first-run film with circuit affiliated theaters in the same market at the same time is called playing day and date, and it came into vogue in the 1970s. It probably became necessary because of shortage of theaters and play dates on the major circuits. The distributors released pictures at several theaters in a given market simultaneously, accompanied by publicity to get a wide response in the shortest time possible. The film opened at the Bijou with admission price of $1.00 for children and $3.25 for adults. When the attendance figures for the first showing at the Bijou were disappointing, the independent exhibitor reduced the matinee price for adult tickets to $1.00. Odeon lodged a complaint with Columbia about lower prices at the Bijou after one of their patrons had complained about paying more for the same film. Columbia instructed the Bijou theater operator to bring up the ticket price to its previous level, which it did, fearing that Columbia would cut off the supply of first-run product in the future.76 On June 22, 1976, a letter was seized from Columbia Canada's head office in Toronto by C. G. McMullen, an investigation officer with Consumer and Corporate Affairs Canada, the federal agency that implemented the Combines Investigation Act. The letter, dated March 22, 1976, is worth quoting in full, as it points out the policy and the general attitude of the U.S. distributors toward independent exhibitors. Columbia's general manager, Harvey Harnick, wrote the letter to I. Levitt, assistant general manager of the company: It is really remarkable that when we bend over backwards for independent exhibitors to play day and date with the Odeon chain the kind of troubles we are running into with their lack of co-operation. 128

In the Shadow

As an example, Odeon's price for children is $1.50 and for adults, $3.50. Malton, Fireside Theatre, is charging 50 cents for all seats. One patron who took some children on Saturday took some other kids today but had to go to Weston because Fireside is closed and the difference he had to pay caused him to call Odeon and literally tear the skin of Bob Yeoman. At the same time, the Bijou Theatre is charging $1.00 for all seats, adult or children. The Universal Theatre double-billed and all of this is causing us nothing but untold grief. It is one thing to get dates but another thing again to set up these dates without finalizing not only terms but admission prices, etc., so that they can be part of the overall break. Under no circumstances will any of our forthcoming saturation pictures be allowed to play with any independents or circuits unless there is an agreed-upon general admission between all. I am not saying what the price should be but certainly it should be standardized and anybody who doesn't want to fall into that category can drop out. . . . P.S. There is even trouble with Canadian Theatres in this regard and this notwithstanding the fact that I checked this out with Frank Price who assured me that the Canadian Theatre admission price would be consistent with the other theatres. It seems that somebody again disregarded their head office instructions.77 The federal government filed a suit against Columbia under Section 38 of the Combines Investigation Act charging that Columbia had unlawfully influenced the price of theater tickets at the Bijou. Columbia pleaded guilty to the charge and was convicted on June 9, 1977. The judge, C. J. Cannon, imposed a fine of $1,250 and a prohibition order against Columbia not to repeat the offense of enforcing its uniform ticket price policy in the future.78 The crown prosecutor appealed the sentence on grounds that the provincial court judge did not give sufficient consideration to the aspect of deterrence.79 The Ontario Court of Appeals quadrupled the fine to $5,000.80 The government withdrew a criminal charge against Harvey Harnick, apparently because of his age and poor health. Columbia undertook in writing to deliver a copy of the prohibition order against price fixing to all its customers in the exhibition business. Although the Bijou theater operator complied with the demand from Columbia to increase the ticket price, the case set a precedent in the Canadian film industry. For the first time in its history, government intervention had resulted in the conviction of an American major for employing its monopoly power to limit competition in the Canadian market. Two other convictions were obtained by the federal government on 129

Canadian Dreams and American Control

price fixing charges by distributors in the late 1970s. The government claimed that United Artists prohibited Famous Players from reducing the admission price for One Flew over the Cuckoo's Nest, Missouri Breaks, and A Bridge Too Far, all released in Canada between 1976 and 1977. United Artists argued that when it required Famous Players to stop honoring free admissions, the circuit may have misunderstood by canceling all discounted admission prices including senior citizen and student prices. Notwithstanding such argument, the Federal Court of Canada (Trial Division) issued an order prohibiting United Artists from such price fixing, illegal under subsection 38.8 of the Combines Investigation Act (revised 1976).81 Another case of price fixing involved Bellevue Film Distributors, which handled Walt Disney films in Canada in the 1970s. Disney films were popular with family audiences, and drive-in theaters operated by the national circuits and the independents did not charge for young children. The U.S. distributor ordered its Canadian agent to ensure that children under twelve were charged a minimum admission fee of twenty-five cents in all Canadian theaters. Bellevue informed all its customers and its branch managers across Canada of the new policy. The branch managers were asked not to supply Disney films to theaters that did not comply with the new pricing policy of Disney.82 The federal government obtained a prohibition order from the trial court against Bellevue on May 19, 1979, to stop it from practicing price fixing.83 No American firm dominated the entire exhibition and distribution market in Canada, as had been the case between 1920 and 1930, but the theatrical distribution sector was dominated by American oligopolies which operated as a cartel in Canada. The Canadian film industry's structure as a branch plant of the U.S. transnational film corporations was fully developed in this period to serve the U.S. film industry's interests. Canadian capitalists enthusiastically participated through Famous Players and Odeon in maintaining the structure of domination in Canada, primarily to ensure profitability. The resistance to this structure by independent, small capitalists in the exhibition sector did not result in any substantial change because of the ineffective legal means available. Monopolization of the Canadian first-run market diminished competition in the distribution market among leading U.S. producer-distributor corporations and limited the competition in the exhibition sector for films. A by-product of this system of monopoly left Canadian independent exhibitors, distributors, and producers in a vulnerable 130

In the Shadow

position vis-a-vis the American film industry cartel. No vertical integration of production, distribution, and exhibition occurred within the Canadian film industry, as it had occurred in the United States. To analyze the reasons for the underdevelopment of the indigenous producers and distributors and the lack of integration, it is necessary to look at Canadian government policy with respect to the domestic film industry.

131

4.

State Intervention and the Battle to Gain Control Two visions represent accurately how the functionaries of the two nations viewed their respective roles in furthering the development of their own country's film industry. American Consul General in Winnipeg, John Edward Jones, wrote openly in 1909 in the New York trade publication Moving Picture World on the potential of the Canadian market for the expansionary interests of American capital. His letter in part stated: "In this country where all forms of entertainment are scarce, moving pictures are welcomed, and there is no reason why the manufacturers of the United States should not control the business."1 The Canadian view, as expressed by Ray Peck, director of the Canadian Government Motion Picture Bureau, in 1927 defined the creation of a film industry in purely branch plant terms: We are attempting at all times, as Canadians, to induce American capital and manufacturing interests to come into Canada and establish branch factories. I look on the American film industry much as a branch factory idea insofar as it affects Canada. American motion picture producers should be encouraged to establish production branches in Canada to make films designed especially for British Empire consumption. I do not entirely agree with the thought. . . that the experiment of allowing American producers to get a footing in Canada would be a dangerous one. We invite Americans to come over to Canada to make automobiles and a thousand and one other things, and why not invite them to come over and make pictures, but make them the way the British markets demand? 2

132

State Intervention

His vision was further limited by the kinds of films that would be made in Canada—films that would appeal to the British markets. Although the Canadian bureaucratic elite was colonial to the core of its consciousness, they became partners with the U.S. film industry and its allies in Canada in determining the course of Canadian cinema. The Motion Picture Bureau, which Ray Peck headed, made promotional films such as travelogues. The Associated Screen News of Canada (a Canadian Pacific Railway subsidiary) had produced short subjects for industrial sponsors including travel and promotional films. The entire field of feature film production, distribution, and exhibition was controlled by the American film industry. In the late 1930s, realizing the potential of publicity for external and internal purposes, the government of Canada invited John Grierson, the renowned documentary filmmaker from Britain, to revive the dormant bureau. Grierson's work in Canada, the team of filmmakers he gathered under the umbrella of the National Film Board, and their contribution to the growth of film culture in Canada have been covered elsewhere.3 What is important for our purpose in this chapter is that the Canadian government created a mechanism by which state-supported documentary film production could occur.4 Although not intended to alter the feature film industry in Canada in any way, the NFB and its filmmakers played a key role in different historical periods to lay the foundation for a national film industry in Canada. The nature and the role of state intervention in the Canadian film industry were determined by the contradictory forces in Canadian society—a small but growing group of Canadian filmmakers, the unintegrated enterprises in distribution and exhibition, the American film industry, and their allies in exhibition and distribution.

Branch Plant Film Industry, 1928-1938 In the same year Ray Peck wrote the letter already quoted, Canadians were becoming concerned about the overwhelming presence of American films rather than British films in their theaters. At the same time, events occurring in Britain resulted in a branch plant film industry in Canada. The British government intervened to preserve British film production by passing the Film Act of 1927 which imposed a distributor's quota and a screen quota, thereby making the production of British films inevitable.

133

Canadian Dreams and American Control

Just a year before, W. L. MacKenzie King, Canada's prime minister, had spoken eloquently at the Imperial Conference in London, supporting the quota for British pictures in the empire and domestic production in the colonies. However, he did nothing to implement his ideas at home. After 1925, the Government Motion Picture Bureau seriously attempted to persuade American film companies to produce films in Canada, but it failed. However, with the passage of the British film quota law, American companies moved into Canada to produce quota "quickies." Peck's vision of a branch plant film industry appeared to be on the way to realization. Between 1928 and 1938, a total of twenty-two feature films were produced in Canada to circumvent the British quota.5 Remarkably enough, the Canadian government allowed the country to be used by the American film industry in its attempt to subvert the quota law in Britain. One wonders where the Canadian government placed its allegiance—with imperial Britain or the imperial United States? The 1938 Film Act in Britain excluded dominion film productions from qualifying for the purposes of the quota, and the Canadian branch plant film industry disappeared entirely.6

Currency Crisis and the American Lobby The feature film industry in Canada became a policy issue for the Canadian government in 1947, when the House of Commons, under the prime ministership of MacKenzie King, debated motion picture imports along with vegetables and other consumer goods from the United States. The context in which the discussion took place was the serious dollar shortage faced by Canada that year. Canadian reserves of U.S. dollars and gold shrunk from $1045 million at the end of 1945 to a mere $300 million in 1947.7 The motion picture industry in Canada contributed significantly to the balance-of-payments crisis. In 1947 a total of $20 million left Canada, of which $17 million went to the American companies and the rest to British and French film companies.8 The government was considering imposing restrictions on various imported goods from the United States to avert an impending dollar devaluation. On November 17, 1947, it passed the Emergency Foreign Exchange Conservation Act, which imposed sweeping import restrictions on a wide variety of American goods. 134

State Intervention

The government was considering measures such as film import quotas and retention'of some of the profits made by the American majors in Canada to channel them back into film production. The initiatives had the support of Ross McLean, the film commissioner of the NFB, who succeeded John Grierson. In his position as chief advisor to the government on film policy, McLean saw the currency crisis as an opportunity to establish a national film industry and challenge American control of the feature film market in Canada. "Grierson and I considered it a natural development to move from documentaries into more interpretive films, and eventually into features," he said.9 McLean believed he could accomplish such a goal in partnership with private capital in Canada. Even such limited aspirations for national control of the film industry would land the NFB in a battle with the Hollywood lobby and its allies in Canada. Among the goods that were not affected by the Foreign Exchange Conservation Act were motion picture imports. The House of Commons considered the issue at length, and the quota law of Great Britain was also debated, but the American film industry lobby in Canada convinced the minister of trade and commerce, Clarence D. Howe, that an import quota would not be in the interest of his government.10 J. J. Fitzgibbons, president of Famous Players, met with Howe to try to change his mind regarding legislated quotas and blocking the earnings of theaters. Howe was asked in the House of Commons why the government did not impose film quotas: It was thought that simply to ration United States films would not be a satisfactory solution. After all, there would be other ways of meeting the situation which perhaps would be more profitable in Canada. At the moment extensive negotiations are going on between the government of Canada and the entire moving picture industry of Hollywood and I hope that within the next two or three weeks I shall be able to report a favorable transaction whereby we shall obtain a substantial return in publicity for Canada and possibly some more concrete returns as well.11

Howe went on to emphasize that "a great many people in this country like to go to the movies; therefore, if we can get a quid pro quo in some other way than by cutting down movie films, it seems the logical thing to do." When a member of the House of Commons asked him why the government did not want to impose a quota favoring British films and encourage British film imports, Howe replied, "I cannot think of any way, except to go over there and buy them, and bring them out. They are entirely free to come into this market."12 The 135

Canadian Dreams and American Control

American film industry lobby had convinced Howe that Canada was a market in which any country could compete freely. The lobby consisted of representatives of both international and national capitalists: Francis Harmon, vice-president of the Motion Picture Export Association of America (MPEAA),13 and J. J. Fitzgibbons, president of Famous Players Canadian Corporation. They sold Howe on the idea that a quota on American films might infuriate the faithful moviegoers in Canada and that the MPEAA would find a solution to correct the outflow of dollars.14 At a Rideau Club luncheon in Ottawa on January 14, 1948, the MPEAA won important allies in the government: Lester B. Pearson, secretary of state for external affairs; Donald Gordon, deputy governor of the Bank of Canada; and Earnest Bushnell of the Canadian Broadcasting Corporation.15 The MPEAA sold what was essentially a public relations idea to the government, entitled the Canadian Cooperation Project (CCP), which proposed that the American film industry cartel would promise to make short subjects, newsreels, and some features in Canada.16 There was no clear commitment on the part of the MPEAA about the number of films or their budgets or where they would be distributed and exhibited. Most of the promises were never kept.17 They were never intended to be kept. The MPEAA's strategy was to ensure that Canada would not follow Great Britain in imposing a film import quota or a duty on the rentals. The CCP took the place of those restrictions.

Canadian Cooperation Project The Canadian government hailed the CCP as a major accomplishment and publicized it as a vehicle to establish a film industry in Canada. However, the American film industry had no inherent interest in starting a film industry in Canada. The following letter, dated March 4, 1948, written after the Rideau Club meeting by Fitzgibbons to Spyros P. Skouras, the president of Twentieth Century-Fox, testifies to that fact: There are people in Canada—as in every other country where American films are released—who insist upon American companies building studios all over the world and scattering their production activities in an uneconomic fashion. If we are to avoid extreme pressure for expensive and expansive studio operations in Canada, then we must deomonstrate

136

State Intervention

to the Canadian government our capacity really to do a good job for the Dominion.18

Fitzgibbons was probably clarifying to the MPEAA member companies that there was no truth to the Canadian government's claim that the CCP would lead to establishing a film industry in Canada. "To do a good job for the Dominion" meant simply to do a good public relations job. In April of that year, the MPEAA lobby met with Howe in Ottawa to discuss the production of motion pictures in Canada, which was publicized by the MPEAA as a boost to local production. The Canadian Moving Picture Digest, the prominent trade paper, ran an optimistic headline on April 17: "Canada-US to Cooperate/Expect Increased Production." These were, of course, public relations gimmicks to stop the Canadian government from legislating any quotas. The smoke screen created by the MPEAA lobby through the CCP began to thin out in less than a year, and some government officials in high positions were beginning to get suspicious. They included Ross McLean at the NFB, who objected to the superficial nature of the CCP. The board had been distributing newsreels and shorts in the United States successfully, and there was no reason to duplicate that effort. As noted before, McLean was a proponent of retaining some of the profits of MPEAA companies to promote a feature film industry in Canada. The board was seen by the MPEAA as a critic and a competitor from the beginning. THe MPEAA circumvented the board to minimize any influence it had in the government.19 When the board became openly critical of the CCP, the MPEAA disagreed with McLean and had the project transferred from the NFB to their ally, C. D. Howe's ministry. A close associate of Howe, Archibald Newman, took over the supervision of the CCP. The MPEAA agreed to hire Blake Owensmith, who had worked in Hollywood before joining the Canadian Army Film and Photo Unit during World War II, to visit the script departments of various studios in order to make suggestions. The result was that Canadian places were mentioned in American films. One such film was New York Confidential, in which the line "They caught Louis Engleday in Detroit" was changed to "They caught Louis Engleday on his way to Canada."20 The MPEAA lobby organized a propaganda campaign against the NFB for competing unfairly with the private-sector filmmakers. It won some support from the Canadian filmmakers in the private sector because they figured that a reduced NFB would mean more funds for private corporations to make government-sponsored films.21

137

Canadian Dreams and American Control

The cold war political atmosphere and the anticommunist hysteria in Canada gave the MPEAA another opportunity to weaken the NFB. John Grierson, who had left the board in 1945, was summoned by the royal commission inquiring into the Gouzenko spy affair in 1945-46. The commission had repeatedly accused him of hiring Communists and Communist sympathizers to work for the board and asked him if he himself was a Communist. The MPEAA companies cooperated with the U.S. government in its systematic attack on the arts community which included Hollywood workers. While this purge of progressive individuals continued in both countries across a wide spectrum of institutions destroying the lives of many people, it gave the right-wing politicians in Canada a chance to attack the NFB as wasteful and Communist-ridden. The many socially committed individuals Grierson had assembled to build the public-spirited institution were discredited as "security risks."22 Ross McLean, who succeeded Grierson and a critic of the CCP, became the center of the storm. He was ordered to fire a number of people from the board who were outspoken on certain social and political issues. The Ottawa Citizen ran a series of articles defending the board and noted on May 12, 1949, that "conclusive evidence has been produced to show how private filmmaking companies in Canada, backed by Hollywood, made [the NFB] the object of a concentrated attack."23 McLean was a seasoned functionary in the government with good connections but was unable to withstand the onslaught from the MPEAA lobby and the conservatives in the government. Robert H. Winters, a key Cabinet minister, was the MPEAA ally in this effort.24 McLean was unceremoniously dismissed in December 1949 and sent off to assume a post at UNESCO in Paris. The government appointed Arthur Irwin, editor of Maclean's, who had no film experience to run the NFB. The objective was to destroy the board. Additionally, the MPEAA had the assistance of the U.S. State Department to head off any criticism of the CCP in the government. One of the roles of the State Department is to make sure that a favorable climate exists for American business to operate unhindered by national governments around the world. Gathering intelligence on potentially damaging legislation, public opinion, or the opinions of key bureaucrats seems to be a day-to-day affair for American ambassadors and their personnel. In this general mode of operation, the American ambassador to Canada in 1949, Lawrence A. Steinhardt, earns a place in history. He alerted Francis Harmon, vice-president of the MPEAA in a letter dated September 7, 1949, regarding dissatisfaction with the CCP in certain government circles. In the face of further deterioration 138

State Intervention

of Canada's dollar drain to the United States, he warned the MPEAA that the Canadian government may impose further restrictions on American imports and even freeze a portion of their profits: To put it bluntly, the Canadian authorities appear to be under the impression that at least some of the American companies are running out on the Canadian Cooperation Project since July 1, 1949, and to ignore the recent deterioration in the Canadian foreign exchange position, and to assume that they are in no danger of the imposition of severe restrictions under the Emergency Exchange Conservation regulations on the import of American pictures into Canada. In view of the foregoing, and because of my earnest desire to preserve the present satisfactory status of American motion picture films in Canada, I would be derelict in my duty were I to fail to invite your attention to the fact that unless all the members of the Association [MPEAA] take immediate steps to satisfy the Canadian authorities that each of them is participating wholeheartedly in the Canadian Cooperation Project, all of the members of the Association must be prepared for the imposition of restrictions on the import of American motion picture films into Canada, or in the alternative, be prepared to have at least a part of their earnings in 25 Canada frozen. The MPEAA reacted swiftly to the ambassador's warning. Collecting what could be presented as evidence of the American film industry's sincerity in the CCP to the Canadian Cabinet, Francis Harmon arrived in Ottawa on September 26. In a meeting with Howe and other government officials, the MPEAA assured them of the expansion and continuation of the CCP in the 1950s.26 Howe, under whose direct supervision the CCP operated, appeared satisfied with the project and assured the MPEAA that Canada would go on with it. A CCP report declared optimistically: As a result of these meetings, we have the assurance of the Canadian government that no adverse action will be taken in the near future against the American Motion Picture Industry. . . . Although at no time did we commit the Industry to any definite amount of production in Canada, we have indicated that at least three feature pictures will be produced in whole or in part in Canada during 1950. This particular part of the Project makes the greatest impression on the Canadian government. The amount of money spent by the American companies is not really as important, it seems, as the fact that they are there on location and are seen actually shooting a film.27 This quote implies that the Canadian government was also looking for a public relations gimmick in the CCP. Howe, with an important portfolio, 139

Canadian Dreams and American Control

Eric Johnston, president of the Motion Picture Association of America, 1946-1965. (Courtesy of the Museum of Modern Art). could not have been a gullible man. Originally, the government had agreed with the MPEAA that the CCP would have the following objectives: (1) to produce more American films in Canada, (2) to distribute more Canadian films in the U.S. market, (3) to provide opportunity for Canadian capital to participate in American production, (4) to promote tourist trade in Canada, and (5) to present general information about Canada to Americans.28 But the government did not push the MPEAA to carry out all the objectives of the CCP. Following a visit to New York to meet with the officials of the Motion Picture Association of America, Donald Gordon, the banker, recommended to Howe that the highest priority of the CCP should be placed on the last two objectives.29 The CCP was clearly being steered by the American majors to suit their goals, and the Canadian government went along. Consequently, for a total of three possible films to be produced in Canada, the government allowed the MPEAA to extract $17 million a year under foreign exchange crisis conditions. The outcome of the CCP, a public relations scheme, was continuation of American control of the Canadian film market. The MPEAA si140

State Intervention

lenced its critics effectively with full cooperation of the government. The Canadian government supported the project and made it a success. The American film industry never claimed that the CCP was going to help establish a film industry in Canada, but the Canadian government did. It was a way of covering up their lack of policy initiatives to encourage the production of indigenous films. The government did not propose any legislation to help create a national film industry until 1965-66. As will be discussed, the government failed to deal with the principal contradiction in the Canadian film industry, i.e., foreign control of domestic distribution and exhibition markets. There was no fanfare or public ceremony to bury the CCP. The project came to an end when the pressure on Canada's currency reserves eased with the postwar boom in the economy in 1951. American films continued to dominate the Canadian screens. Those who had the power to change that in the Canadian government appeared satisfied with the legacy of CCP. After meeting with American film industry representatives in 1952, Lester B. Pearson, then secretary of state, wrote to Eric Johnston, president of the MPAA: "It was encouraging to learn of the C.C.P.'s success in maintaining interest in Canada and to hear also about some of the long-term benefits which are emerging as a result of the policies pursued by the Motion Picture Association of America through this means.30 Johnston happily concurred with Pearson and waxed eloquent about the well-being of both countries: Our industry has a great and growing interest in the growth and prosperity of Canada. We believe that the well-being of both our countries will be best served by a continuing close and friendly relationship. The industry's Canadian Cooperation Project is certainly one way in which our mutual well-being can be advanced.31

While capital and jobs were being exported out of Canada's film industry with no assurance of American tourist dollars flowing into Canada, the Canadian government policy enriched the American majors and their allied circuits in Canada. Neither the home-made Canadian films nor the British imports desired by many were available to Canadian audiences. In 1959, the MPEAA companies released 305 new pictures in Canada out of a total of 651 films. There was only one domestically made film.32 Film rental revenues leaving Canada for the United States continued unhindered. They amounted to $16.8 million in 1963, and by 1974 that figure had risen to $54.4 million, giving Canada the dubious distinction of being Hollywood's largest foreign market.33 141

Canadian Dreams and American Control

Support for Film Production The backdrop for the Canadian film production industry struggle since the 1950s has been the anxiety over loss of cultural sovereignty in both French- and English-speaking Canada. The Quebecois had begun to realize that they were an urban as well as a rural society. Their existence as a unique people in a predominantly Englishspeaking continent rested on their ideological institutions such as the church, the state, and the parochial educational system. They began to question these institutions, which came to be called the "Quiet Revolution." It led to daring innovations in the educational system, setting up a separate social security system, the nationalization of electric power, and demand for a more equitable share of the nation's wealth from the federal government.34 This historic development of Quebec's search for economic, cultural, and social autonomy eventually led to the radical economic nationalism of the 1960s. Economic and cultural nationalism was not limited to Quebec alone but was manifested nationally. One year after signing the Canadian Cooperation Project with the MPEAA, the federal government responded to the widespread concern over national cultural sovereignty by appointing the Royal Commission on National Development in the Arts, Letters and Sciences (the Massey-Levesque Commission). The Liberal government of St. Laurent articulated the basic premise of the state's intervention into the cultural sphere: "It is the national interest to give encouragement to institutions which express national feeling, promote common understanding and add to the variety and richness of Canadian life, rural as well as urban."35 The commission's report, submitted in 1951, supported the government's premise for intervention in the cultural sphere by noting that such institutions would help stem the tide of the "American invasion" which the commission found "formidable."36 The commission recognized the need to develop a national communications infrastructure just as the government had done in the areas of transportation and broadcasting, but its proposals did not encompass feature film. The commission acknowledged that commercial cinema was "not only the most potent but also the most alien influence shaping our Canadian life. . . . Hollywood refashions us in its own image." But it did nothing to encourage domestic production. Underlying these proposals of state-supported cultural development was the commission's idealist conception of culture. It linked culture to "the training, development and refinement of minds, tastes and manners" and to the 142

State Intervention

"development of intelligence through the arts, letters, and sciences." It made an explicit distinction between "high" and "low" culture, relegating popular cinema to the area of low culture. The commission endorsed the National Film Board's educational function of documentary film production as promoting Canadianism, but the production of feature films was assigned to market forces and the American film industry.37 While an opportunity was lost to establish a national film industry, the state finally intervened in the 1960s as a result of increased pressure from filmmakers. The 1960s were years of intense political struggle in North America. In Canada, French Canadians boldly asserted their separate identity and culture and raised certain political questions about their survival within the country, which was dominated by English Canada. Television provided a new outlet for filmmakers in Canada, particularly in Quebec where a cultural revival was under way. The National Film Board had been the training ground for many filmmakers in both French and English Canada who were eager to produce feature films. But with the distribution and exhibition markets preempted by foreign corporations, Canadian filmmakers had difficulty finding investors. Some of them had to leave Canada to find employment elsewhere. Among them were Sidney Furie and Norman Jewison, who emigrated to London and Hollywood, respectively, to become successful filmmakers.38 Quebec filmmakers such as Claude Jutra and Gilles Carle, who were committed to the idea of making films for the Quebecois, remained in the country to struggle to create a film culture. They founded the Association Professionelle des Cineastes du Quebec in 1963 to lobby the federal and provincial governments to intervene in the film production sector. Table 8 provides an overview of what was going on in the feature film production sector in English and French Canada between 1960 and 1970. I do not know how reliable these data are; it is difficult to verify them in the absence of legislated requirements for producers to file such information with a designated federal agency. They are a helpful barometer for understanding the patterns of production and market access in this period. It is clear that the independent production sector remained underdeveloped throughout this period. Although a steady growth is noticeable in the number of films produced over the elevenyear period, the average number of films produced in Canada annually in both languages by independent producers was about six. If we add the twenty-seven features produced by the NFB in the same period, the average comes close to nine films a year. Notable is the lead 143

Table 8 Estimated Number of Feature Films Produced in Canada, 1960-1970

Features produced NFB (English) NFB (French) Independent (English) Independent (French) 16mm 35mm CFDC collaboration

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

TOTAL

2 1 1 — — 2 — —

1

1

9 I

—

1

—

—

11 — 3 2 6 6 5 —

7 — 1 2 4 6 1 —

8 2 2 2 2 4 4 —

10 1 2 3 4 6 4 —

17 1 4 4 8 6 11 4

23 — 4 12 7 11 12 11

95

I

6 1 1 2 2 4 2 —

_ — —

Source: New Canadian Film 3, 13 (April 1971).

_ 1 1

4 3 4 5 —

7 20 31 37 48 47 15

State Intervention

that Quebec filmmakers took in producing features. As we will see, the creation of the Canadian Film Development Corporation by the government of Canada in the late 1960s helped boost production, at least temporarily, into the next decade. Of the ninety-five features produced in Canada, sixty-one pictures were released in Montreal, twenty-six in Toronto, and thirty-four in Vancouver. Thirty-four of the features were released in foreign countries.39 It is not known how long these films played in the theaters, what kind of play dates were given to them by the circuits, or whether the films returned any profits to their investors. Because of the enthusiasm of Quebec audiences at the time for French-language films, especially those made in Quebec, many of them may have found their way into theaters in Montreal. Compared with that record, the English Canadian market was less accessible to Canadian filmmakers. As these films had to compete for play dates against imported American films, producers found domestic market access a serious impediment to their profitability. With Canada producing more films in the late 1960s, access to the domestic market became an acute problem. I will return to the question of how the governments attempted to deal with it later in this chapter. It is worth noting that NFB participation in feature film production was more an accident than planned action. The board's mandate excluded feature film production. Consequently, it could not officially make features. However, the board could not contain the enthusiasm of its employees who were eager to explore the narrative form and make feature-length films. The innovations in equipment— lightweight 16mm cameras (Arriflexes versus Auricon Pro cameras), lights, and high-quality portable sound-recording devices (Nagra tape recorders)—made it possible for experimentation in film style all over the world. Film production moved out of sound studios into the real world, where all manner of stories and people became material for feature films. The turbulent social situation of the era fueled this shift in filmmaking, which was labeled cinema direct. Inevitably Canadian filmmakers landed in the midst of the biting economic and political questions of their society with their newfound tools of cinematography. While the NFB tried to shape Quebec filmmakers in their mold, they refused to cooperate. They were interested in exploring political ideas and their own culture. In talking about those days, Gilles Carles noted, "The NFB was technically organized but there was intellectual anarchy. It allowed us to do our kind of film."40 The board provided the spatial relationship which helped them to work together and learn the art of 145

Canadian Dreams and American Control

film. Quebec filmmakers told stories of how they, on their own time, while working full-time at the board, assembled crews and shot features on location. They used the board's equipment and film, mostly illegally, often signing English-Canadian names.41 Some talented people participated in the films without salary. The films were edited at the board. It is this kind of dedication and enthusiasm that led to the foundation of the national film industry in Canada in the 1960s. A good example of such a production was Claude Jutra's A toutprendre (1963), which is considered a milestone in Quebec cinema. The film explored human insecurities, the issues of race and class in Quebec society, and Quebec's neocolonial status in Canada. A number of talented people assisted with the film, with Jutra as director and principal actor. It was filmed by Michel Brault, Jean-Claude Labreque, and Bernard Gosselin, who later established themselves as notable cineastes. On the English Canadian side, similar efforts were occurring in Toronto. These filmmakers, dissatisfied with the lack of opportunity to make films in Canada on a sustained basis, pressured the government to intervene on their behalf in the film industry. There was pressure on the government from the other sectors of the industry as well. N. A. Taylor, who was affiliated with the Famous Players circuit, lobbied for financial support for local filmmakers through his trade magazine, the Canadian Film Weekly. Taylor had started to distribute Italian imports such as Hercules. He knew Guy Roberge, the commissioner of the National Film Board from 1957 to 1965, and asked him to get involved in feature film production. Taylor was invited by Roberge to make a pitch to the NFB board of directors to initiate discussion in the government and to create a mechanism for state funding of feature films.42 Taylor may have convinced them, because the board asked Michael Spencer to draft a memo to the secretary of state, the minister responsible for cultural affairs. The memo suggested setting up a small agency, separate from the NFB, to make loans and awards to producers of Canadian feature films. The minister then established the Interdepartmental Committee on the Possible Development of a Feature Film Industry in Canada. The committee was headed by Guy Roberge and included Michael Spencer as a member and Gordon Sheppard (Eliza's Horoscope, 1970) as the secretary. It met once a month for about two years before reporting to the Cabinet in 1964. In August of that year, the Cabinet approved in principle the establishment of a loan fund to promote the development of a feature film industry in Canada. The Cabinet charged the Roberge Commit146

State Intervention

N. A. Taylor. (Courtesy of the National Archives of Canada, Canadian Film Weekly, Coll. MISA 15177.) tee with the responsibility of preparing specific proposals regarding the administration of the fund and other forms of assistance to the industry. In October 1965, the secretary of state announced that the Cabinet had accepted the Roberge Committee's proposal to set up a crown corporation with responsibility for administering a $10 million revolving fund. The corporation, to be modeled on the National Film Finance Corporation in the United Kingdom, would be a catalyst to stimulate production in Canada by investing in films and providing grants and awards to filmmakers.

The Canadian Film Development Corporation (CFDC) The CFDC thus had its formal origins in the Cabinet decision of 1964. Legislation to establish the corporation was introduced in the House of Commons in June 1966. The debate in the House indicated general support for the bill (C-204) as well as a keen awareness among members of the problem of distribution for Canadian films. With the 147

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approval of the Senate on March 3, 1967, it became the Canadian Film Development Corporation Act of 1966—67. The Parliament charged the CFDC with the responsibility to "foster and promote the development of a feature film industry in Canada."43 Section 10.1 of the act laid out its objectives: to invest in individual Canadian feature film productions in return for a share in the proceeds from any such production; to make loans to producers of individual Canadian feature film productions and charge interest thereon; to make awards for outstanding accomplishments in the production of Canadian feature films; to make grants to filmmakers and film technicians resident in Canada to assist them in improving their craft; and to advise and assist the producers of Canadian feature films in the distribution of such films and in the administrative functions of feature film production. The act also addressed the issue of the definition of a Canadian feature film. For the purposes of the act, a feature film would be "Canadian" if (a) the completed film would, in the judgment of the corporation, have a significant Canadian creative, artistic, and technical content, and arrangements had been made to ensure that the copyright in the completed film would be beneficially owned by an individual resident in Canada, by a corporation incorporated under the laws of Canada or a province, or by any combination of such persons; or (b) provision had been made for the production of the film under a coproduction agreement entered into between Canada and another country. The act made it possible for Canadian film producers to seek venture capital from a state agency rather than a private source, which was difficult in Canada. Not only did the applicant for a loan have to be a Canadian national corporation, but the film had to have "a significant Canadian creative, artistic, and technical content." The intent of the act was to secure the benefits to Canadian-owned companies rather than foreign ones. It also attempted to balance the profit-making priorities of private entrepreneurs with the priorities of job creation and national expression in feature films. The act, however, did not address the historic problem of market access to Canadian filmmakers. This approach to establishing a national film industry, which was based on laissez-faire capitalism in an industry dominated by a foreign cartel, was not going to work. Fully aware of the distribution problem for Canadian films, the Roberge Committee opted for "moral suasion" rather than legislated quotas to guarantee access to the Canadian markets.44 The committee's final report to the Cabinet included the following paragraph: 148

State Intervention

The co-operation of Major distribution companies is a necessity for the development of the industry and Canadian feature films must be given fair and equitable treatment in distribution and exhibition, particularly in Canada. It is, however, difficult to prejudge the attitude which the Major distributors will take toward Canadian productions. This can only be determined after Canadian producers have made a number of films and have established a proven record. Little or no evidence exists at the moment to show that there would be a negative attitude on the part of foreign-controlled distribution companies, and public opinion might very well have an important bearing on the matter once a few good films had been released. The Committee recommends therefore that, for the present, the Corporation's role in distribution should be to assist Canadian producers in arranging distribution through established companies in Canada and abroad. In connection with foreign distribution, the Corporation should seek the co-operation of the foreign-controlled distributors in Canada and also encourage co-production and joint production arrangements. . . . If foreign-controlled distribution companies prove reluctant to distribute Canadian films in Canada on an equitable basis, 45 other measures may be necessary. The Roberge Committee did not have to prejudge what the policy of the majors would be toward Canadian films. They knew it in advance of submitting their proposals to the government. The committee had met with the MPEAA members in 1965 in the course of preparing their report to the government. Griffith Johnson of the MPAA chaired the meeting, which was attended by representatives of all the majors. Michael Spencer characterized them and the meeting in these terms: "I remember them as colourful types and their general reaction to the proposal from Canada was exuberantly negative. They were, in fact, re-runs of Lewis Selznick and really couldn't understand our enthusiasm for Canadian production. One of them remarked that the proposal scared the hell out of him."46 The majors offered some concrete recommendations to be included in the Roberge Committee report: Make available studio and other technical facilities of the type that other foreign countries offer U.S. producers on attractive terms so as to make it possible for American firms to come to Canada rather than use their own facilities in Hollywood. Avoid discriminatory measures against American film producers and distributors, including screen quotas and import quotas, special earmarked amusement taxes, taxation differentials, restrictions affecting the outgo of earnings by foreign film producers and distributors in Canada, artificial and non economic regulations and barriers, contents requirements, etc. 149

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The majors' Canadian subsidiaries could arrange distribution of films in Canada and act as intermediaries between Canadian producers and themselves.47

These measures, if implemented, were clearly intended to protect the interests of the MPEAA members and thereby subvert any attempt by Canadians to establish a national film industry. The scenario set by the majors has been realized in different ways during the last twenty years or so. What the committee essentially did was to work within the existing structure of domination by taking the politically safe path of avoiding a policy of confrontation with the majors. Although acceptable to the politicians, such expedient policymaking yielded limited benefits to Canadian filmmakers. Judy LaMarsh, the secretary of state in 1966, echoed the committee's position on distribution in the Parliamentary debate on the CFDC bill: Many countries, in order to encourage the distribution of their own films, have applied quotas. We have chosen, however, not to introduce this kind of restriction in the Bill at this time. Canadian films must, therefore, make it on their own merits. But in rejecting quotas we are counting on film distributors and cinema chains to give more than ordinary support to the aims of this program.48

This contradictory policy, which on the one hand supported laissezfaire competition in a market dominated by a foreign film industry cartel and, on the other, recognized that Canadian films needed special treatment by those monopoly firms, was not going to yield any benefits to the Canadian film industry.

CFDC's First Decade The government appointed a board consisting of five members, with Michael Spencer as the executive director, in February 1968. The NFB's film commissioner was appointed as the ex officio member, thereby giving it a presence on the CFDC board. With the adoption of bylaws for the corporation in April 1968, the CFDC became actively involved in financing Canadian films. For the purposes of analysis, the CFDC's film production activity has been divided into two periods: before the 1966 tax shelter and after. In the first twelve months of its existence, the CFDC formally considered fifty-two requests for funds, of which eleven proposals were for 150

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Michael D. Spencer, executive director of the Canadian Film Development Corporation, (1968— 1978). (Courtesy of Michael D. Spencer.) feature films. It committed funds totaling $366,639 for feature film production, which included $110,266 for script development.49 By 1974, the CFDC had participated in a total of 120 feature films of which 69 were English-language films and 51 were in French. They covered a wide range of themes and tried to appeal to a large audience. Only two films were not completed. Table 9 points out that social themes were the single most important category of films financed by the CFDC, followed by comedy. Between 1968 and 1978, the CFDC assisted in the production of fifty-eight major English-language films with budgets in excess of $200,000. It also provided funds for the production of forty-five films costing less than $200,000 each. Only five English-language films— The Apprenticeship of Duddy Kravitz, Heart Farm, Black Christmas, Shivers, and Death Weekend—returned a profit to the corporation.50 The critical factor in a film's commercial success is distribution. Most of the CFDC films were distributed by Canadian-owned independent distribution companies, which had limited access to the first-run 151

Canadian Dreams and American Control

Table 9 Categories of Feature Films Financed by the CFDC, 19681974 Category

French

English

Social Comedy Sentimental Psychological General Documentary Suspense Surrealist Adventure Horror Children Experimental

18 9 5 2 6 4 1 4 0 0 2

15 11 3 5 9 7 7 2 2 1 1

33 20 8 7 15 11 8 6 2 1 3

27.5 16.7

6

6

5.0

TOTAL

51

69

120

100.0

0

TOTAL

Percentage of total

6.7 5.8

12.5 9.2 6.7 5.0 1.6 0.8 2.5

Source: Department of the Secretary of State, Bureau of Management Consulting, Evaluation of the Canadian Film Development Corporation, Vol. 2, September 1974, p. 1. Note: Of the total 120 films financed, only two were not completed.

markets in Canada. As we will see, the majors showed little interest in releasing the Canadian films in the Canadian, U.S., and other markets. From its inception in 1968, CFDC-assisted films experienced great difficulty finding access to theaters in the domestic and foreign markets. The people of Quebec strongly supported the Quebecois films. Denis Heroux's J'ai mon voyage (1973), which was distributed by an independent Canadian company, grossed $800,000 in the Quebec market alone. Two other notable films, The Rowdy Man (1972), and Wedding in White (1972), made in English Canada, received wide critical acclaim but not wide distribution in the Canadian market. There was also the problem of Quebec films not reaching the English Canadian market, and vice versa.51 Michael Spencer, the Executive Director of the CFDC, singled out distribution as "Enemy number one in any discussion of future growth" of the Canadian film industry.52 To examine why the CFDC films were excluded from the Canadian theatrical markets, we turn to the relationship between independent distributors and the branch plant film industry. 152

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Independent Distributors, the Circuits, and the Majors The independent distribution sector in Canada was important to the development of the production sector. In 1968, when the CFDC began to function, there were a total of fifty-six distribution companies with one hundred twenty exchange offices in the country.53 Not all of them had national distribution networks. Those independent of any affiliation with the majors probably numbered around forty-five. They marketed foreign-language imports—mostly French and Italian—and specialized horror, comedy, and other genre films. In the same year, there were ninety-five film production companies, most making shorts, advertisements, training and other industrial films, and so on. With the hope of financing available through the CFDC, more production companies were floated. By 1972, one hundred fifty companies were involved in production which contributed to substantial growth in filmmaking. However, fewer than ten companies were engaged in feature film production. They turned out a total of fourteen features.54 While American major distributors did not release Canadian-made films in any significant number, the independents, by and large, took the financial risks involved in marketing Canadian films. A total of one hundred films were distributed in Canada by eight independent distribution companies between 1967 and 1977.55 By comparison, the record of the U.S. major distributors was dismal. Between 1970 and 1978, Paramount distributed one Canadian picture, Universal one, MGM one, Avco Embassy one, Columbia two, Fox two, Warners three, American International Pictures four, and United Artists zero.56 Given the lukewarm reception to its films by the U.S. distributors, the CFDC decided to intensify its sales effort. It appointed Wolfe Cohen, a Canadian and former head of Warner Brothers International, to use his contacts to promote CFDC films to the American majors. According to Michael Spencer, he did not succeed in that effort.57 The majors charged comparatively more commission for distribution than the independents. The latter group of companies received an average of 35 percent commission on film rental income, whereas the majors charged 42 to 45 percent.58 There were serious problems in selling the distribution rights of Canadian films to American major distributors. Crawley Films, a pioneer production company in Canada with its own distribution arm, had 153

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bitter experiences in dealing with some of the majors. Budge Crawley complained of blatant discrimination by Universal Pictures in distributing his 1975 film, Janice, in the U.S. market. Crawley's own firm distributed it in Canada successfully. The contract with Universal included a "best efforts" clause, but according to Crawley, Universal did not honor the contract. The film opened in San Francisco in one theater and ran for fourteen weeks, after which the distributor did not release it anywhere else in the United States. Crawley maintained that Universal had big-budget pictures of their own that year, including the blockbuster film Jaws. As a result, Crawley's film was shelved despite its good track record of having recovered its costs of production in the Canadian market alone. "They figured, what can this small Canadian producer do. He can't take us to court," said Crawley.59 The most important factor that rendered the independent distributors in Canada vulnerable to competition from the American film industry cartel was its control over the first-run market. This fact was clearly evident in how the circuits allocated playing time to the majors versus the independents. In the motion picture business, one of the most important considerations in distributing a film is finding key play dates such as Christmas, Thanksgiving, Easter, and the summer period in the first-run houses. These dates ensure a certain degree of box-office success, as more than half of the annual theatrical box-office revenues are produced during such periods.60 In Canada, the American majors monopolized the commercially attractive playing periods in all the theaters run by major circuits. Famous Players and Odeon penciled in the play dates at least eight to eighteen months in advance of the majors' releases.61 Moreover, when a major released a big-budget picture, its contract with the circuits called for a certain amount of what was called committed playing time. This, in effect, locked in not just the best dates but almost the entire fifty-two weeks in a year. The victims of this monopoly were the independent distributors and thus, Canadian producers. If a major's film did not do as well as expected at the box office, the circuits would request the distributor to remove the picture from the theaters. But the circuit's theaters were still committed to the agreed playing time in the contract. The U.S. distributor would release another of its films for those remaining weeks or settle to use them at another time. It was only in such circumstances that an independent distributor would receive playing time for its picture. Since most of the Canadian pictures were being distributed by the independents, they had to wait for a hole in the schedule of the two chains.62 154

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When I asked the president of Odeon Theatres, C. R. B. Salmon, why the major theater chains discriminated against the independent distributors and thereby against Canadian pictures, he replied: I have to say from a purely commercial point of view, the people who are entitled to my spare playing time are the people who provide us the five or six blockbusters, if they got other things that have not been played, as against somebody who had provided me with nothing. To me that's not only fair, but it's logical. You know, if you are a Canadian producer and you don't have to be releasing through an American major distributing company, and you think your picture is the greatest, and I tell him, "No, you can't get a Christmas date with Famous because they are all tied up with United Artists, Metro, Columbia, Universal, and so forth," you turn around and say, "Jesus Christ, this is a conspiracy. I am being discriminated against because I'm a Canadian." You are not being discriminated against because you are a Canadian, you are being discriminated against because your picture is no f good [laughter].63

Salmon's statement indicated a collective judgment in the Canadian distribution and exhibition system, which was controlled by the American film industry cartel. This collective judgment applied to almost all Canadian films, except by chance. Salmon used the argument that if there was a "good" Canadian film, it would get played. In other words, it was not the structure of the industry and the market relationships that precluded Canadian films in the national market but their "poor quality." This argument was largely a myth perpetuated by the dominant distributors and exhibitors in Canada. Many Canadian films did not receive commercial distribution in Canada until they won impressive international awards. Claude Jutra's Mon oncle Antoine (1971) and Don Shebib's Coin' Down the Road (1970) were in that category.64 As Table 10 indicates, none of the seven top-grossing Canadian pictures produced between 1968 and 1978 were released in Canada during the best playing times. Furthermore, when a Canadian film was doing well at the box office, despite all the odds against it, the circuits terminated the showing because of a locked-in booking with an American film distributor. An example of such a practice which discriminated against Canadian pictures was the case of In Praise of Older Women (1978). It had grossed $24,000 the previous week from a key theater, when Famous Players abruptly ended its showing in order to accommodate The Boys from Brazil, a U.S. distributor's film.65 The dominant exhibitors' argument was the same as always: the "magic of the marketplace," which masked the structural impediments to Canadian films' achieving access to the audiences in 155

Table 10 Release Dates of Seven Top-Grossing English Canadian Feature Films in Three Key Markets (as of November 15, 1978)

The Apprenticeship ofDuddy Kravitz Black Christmas Why Shoot the Teacher? Who Has Seen the Wind? Shadow of the Hawk Rabid Lies My Father Told Me

Toronto

Montreal

Vancouver

Gross box office ($)

Apr. 1975 Oct. 1974

Apr. 1975 Oct. 1974

May 1975 Nov. 1974

Nov. 1977 Aug. 1976 Apr. 1977 Oct. 1975

Nov. 1977 Aug. 1976 Apr. 1977 Sept. 1975

Nov. 1977 Aug. 1976

2,200,000 2,000,000 1,800,000 1,200,000 1,000,000 910,000 875,000

Nov. 1975

Source: Armand Cournoyer, Canadian Film Development Corporation, interview, Montreal, November 27, 1978.

State Intervention

their own domestic market. The hollowness of the argument became clearer when Canadians began to produce high-budget films with mass audiences in mind and still had difficulty gaining access to Canadian theaters. (I will return to this issue in Chapter 6.) The independent distributor was at the mercy of the two largest theater chains in Canada. An independent's film was primarily used as a filler in the circuits' schedule, and, as a result, the distributor was seldom prepared well to release the picture when it received a call from the circuits. It seldom had the choice of theaters that a film needed to maximize grossing potential. The publicity materials would not be ready because of lack of time. As a result, the Canadian picture would be released "cold," without the necessary prerelease publicity, without the necessary planning and timing.66 As can be expected, the result was, more often than not, disastrous. Some independent distributors found it so difficult to operate within the system that they had to go into the theater business themselves. New Cinema Enterprises, a newcomer in the industry dealing mainly in European imports and Canadian films, leased three theaters between 1975 and 1978 after finding it impossible to get dates for their pictures in the major theater circuits.67 New Cinema could get a total of twelve play dates from the circuits, none of which was at the "best playing times." In 1978, however, it was able to secure more play dates because the majors' films did not do as well as expected. But the situation worsened in 1979, when not a single date became available to the company. As a result, New Cinema decided to go into the theater business itself. The remainder of the independents, who did not have the necessary capital to acquire theaters, had to wait in line to get play dates for their pictures. The independent distributors made another significant attempt to capture a part of the Canadian market for themselves in 1987, to which we will return later in Chapter 9. Clearly the market relations between the majors and the circuits rendered the Canadian-owned independent distributors and the producers at a distinct disadvantage. Many of CFDC's films, widely praised for their artistic quality, had trouble recovering their investment, partly because of these market relations. Table 11 lists the films and CFDC's investment and recovery. Although a film can earn in perpetuity, to be profitable it must recoup the investment immediately after completion. In general, six months to a year after release is the industry standard to assess a film's market success. Total CFDC investment in the eight films amounted to $1,296,520. As of 1974, CFDC had recovered approximately 12 percent of that investment, which 157

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Table 11 Selected CFDC Supported Films: CFDC's Investment and Financial Recovery (as of 1974) Year Produced

Film

Investment ($)

Recovery (%)

1970-71 1971-72 1971-72 1972-73 1972-73 1972-73 1972-73 1972-73

Goin' Down the Road La vrai nature de Bernadette Kamouraska La mort d'un bucheron Rejeanne Padovani Wedding in White Between Friends U-Turn

21,680 165,790 305,490 127,610 128,460 144,800 201,290 201,400

1 12 19 64 0 3 0 0.2

Source: Department of the Secretary of State, Bureau of Management Consulting, Evaluation of the Canadian Film Development Corporation, Vol. 1, September 1974, p. 35.

meant that they were all financial calamities.68 This general failure in policy led the filmmakers, distributors, and the government inevitably to focus on government regulation of the market.

Quotas and Levies The battle to gain control of the domestic film industry by Canadians intensified in the early 1970s as film industry workers realized that state intervention through the CFDC had serious limitations. On the one hand, the CFDC pursued the Hollywood model of tying production to distribution by insisting that a filmmaker have a distribution deal to receive funding. On the other hand, CFDC films were generally excluded from the foreign-controlled distribution and exhibition sector. In Quebec, film technicians and artisans established the Syndicat National du Cinema (SNC) to organize themselves to counter the profit orientation of the CFDC. In English Canada, the Council of Canadian Filmmakers (CCFM) was organized in March 1973 to represent the interests of eight thousand industry workers. It brought together nine unions, a cooperative, and several individuals to lobby the various levels of government in Canada on their behalf.69 These groups of workers in the industry attempted to steer government policy in the direction of legislated quotas and a special tax on the earnings of American majors in Canada. There are essentially two types of quotas: distributor quotas and 158

State Intervention

exhibitor quotas. A distributor quota would require all distributors to carry a minimum number of film titles of particular nationality in their inventory every year, essentially creating a distribution market for those films. But the measure could fail, as there is no way of guaranteeing that a distributor would push those films in the market by investing further for prints and publicity and so on. The exhibitor quota, also called screen quota, sets aside a minimum number of play dates for films of certain nationality in order to guarantee market access to them. The filmmakers and their organizations recommended that the provincial governments such as Ontario and Quebec play a decisive role in ensuring market access for Canadian films. They suggested purchasing a major foreign-owned theater chain or setting up a competing exhibition system in the key cities and implementing a Canadian content quota in commercial theaters.70 The CCFM argued for a flexible exhibitor quota to be tied to film production capacity and the earning power of the exhibitor. Given the small number of Canadian films produced in the mid-1970s, it suggested reserving eight weeks per year for chains (three theaters or more) and four weeks per year for independents. It also recommended setting aside 50 percent of the screen time for all theaters for theatrical shorts.71 A box-office levy is a tax on the box-office gross revenues to be used for financing film production. As provinces already collect an amusement tax on tickets, a levy would be an additional tax which would cut into the profits made by the distributors and exhibitors. This mechanism basically forces them to indirectly invest in film production and thereby creates a financial base for film production independent of the vagaries of government allocations to organizations such as the CFDC. The CCFM recommended a 15 percent levy on the box-office gross of the chains and a drastically reduced rate (5 to 7 percent) on the box-office gross revenue collected by independent theaters.72 The government was fully aware of the need for such measures in the Canadian film industry. Secretary of State Gerard Pelletier announced in July 1972 that his department would study the "critical situation" of film distribution and look into the solution of quotas as soon as possible. The House of Commons Standing Committee on Broadcasting, Films and Assistance to the Arts in May 1971 investigated the problems faced by the CFDC and the film industry. Various members of that committee suggested quotas as solutions. In the absence of a competitive distribution market, the government policy of encouraging production without dealing with the problem of distribution came to be accepted as unproductive by the government itself. 159

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Hugh Faulkner, the secretary of state in 1974, emphasized the urgent need for a screen quota and a levy on box-office receipts: Despite the good films produced, pitifully few of them are even seen by Canadian audiences outside a few large metropolitan areas such as Toronto and Montreal. The Liberal government would like to see guaranteed regular minimum of exposure for Canadian films, in commercial movie theatres across the country. Since theatres fall under provincial jurisdiction, we will initiate talks with the provinces to this end so that Canadians can see Canadian films, wherever they live.73

The question of jurisdiction had been posed as the main obstacle to earlier intervention in the motion picture industry when the Canadian filmmakers demanded government legislation. However, the increased pressure by filmmakers on the provincial and federal governments seemed to have had some effect in 1974. Quebec, Ontario, Saskatchewan, Manitoba, and British Columbia indicated their support for the principle of screen quotas, although they were reluctant to impose an additional tax on the box-office revenues.74 Ontario filmmakers applied intense pressure on the Ontario government to legislate a quota and a box-office levy between 1973 and 1975. The Department of Industry and Tourism commissioned a task force in 1973 headed by John F. Bassett, a film producer, to examine the financial ills of the film industry. It recommended a quota and a levy in no uncertain terms: It is the chairman's conclusion that a quota system combined with a bonus incentive program for Ontario theatres would develop audiences for Ontario-made feature films and significantly increase the inflow of dollars into the Ontario film industry to the benefit of all associated with feature film production.75

The task force emphatically stated that the government needed "to force the exhibitors to test the profitability of Canadian films in the marketplace rather than the private screening rooms where they are subject to the prejudices of too many years of experience."76 The following year, the Klopchik Report for the same department of the Ontario government recommended the same remedies for the ills of the film industry. The Ontario Committee on Cultural and Economic Nationalism stated in its final report in 1975 that protection policies for Canadian cultural production served the public interest and were less costly than public subsidies. The CCFM made interventions with 160

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briefs, letters, appearances, and meetings with the Ontario government, calling for a quota and a box-office levy.77 The workers were eventually disappointed as the provinces looked to the federal government for leadership, which never pursued the quota legislation. Instead, it relied on the American film industry to voluntarily yield screen time to Canadian filmmakers. In July 1973, the secretary of state reached an informal agreement with Famous Players and Odeon to make two weeks of screen time available for English Canadian films (original or dubbed) in the three largest markets: Montreal, Toronto, and Vancouver. The CFDC was asked to subsidize the initial promotion costs of such films to help the independent Canadian distribution companies.78 As a result some films were shown, but, lacking legislated quotas, financing for local films dwindled, thus directly affecting the workers in the industry. The number of major English-language productions sponsored by the CFDC fell from thirteen in 1972 to six in 1973 and four the following year. The CFDC ran out of funds, which meant that it had to wait until further allocations were made by the government. Film production came to a near halt in the country. Unemployment within the English Canadian film industry was estimated to be running close to 80 percent.79 A newspaper report claimed that in a nine-month period during 1974—75, two well-known producers and nine directors left Canada for Hollywood in search of work. An unknown number of actors were reported to have emigrated to other film production centers of the world.80 Several industry groups, including the CCFM and ACTRA, lobbied the federal government and the Ontario government to pass screen quotas and box-office levies to alleviate the crises in the industry. Nineteen industry spokespersons issued a public statement after a symposium on the Canadian film industry in Winnipeg in February 1974, which they called the Winnipeg Manifesto, making the industry's position clear to the government: We, the undersigned filmmakers and film workers, wish to voice our belief that the present system of film production/distribution/exhibition works to the extreme disadvantage of the Canadian filmmaker and the Canadian film audience. We wish to state unequivocally that film is an expression and affirmation of the cultural reality of this country first, and a business second. . . . It is now clear that slavishly following foreign examples does not work. We need public alternatives at every level in the film industry. We must create our own system to allow filmmakers the option of working in the creative milieu of their choice.81

161

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The struggle in French Canada reached its peak in November 1974, when the Association des Realisteurs de Film du Quebec staged a sit-in at the offices of the Film Censorship Board. The filmmakers in Quebec had grown weary of twelve years of patient and quiet lobbying with the provincial government to restructure the film industry. All the government had done was produce numerous studies and reports but no legislated measures to provide market access for Quebec films. The sit-in at the censorship office was both tactical and symbolic. All films had to pass through that office before they could be shown in Quebec theaters. With its closing, the filmmakers practically halted the distribution of films just one month before the commercially attractive Christmas season. They hoped to effectively reduce the flow of dollars to the United States. In a press conference, the filmmakers issued the following statement: In spite of representations made to successive governments by the film industry since 1962, in spite of the internationally recognized quality of Quebec films, in spite of former and recent promises by the governments to administer the Quebec film industry, and in spite of the formal promise made by the current government of "cultural sovereignty" for Quebec, not only has Quebec not fulfilled its responsibilities in film, it has left film to federal organizations and foreign interests.82

The sit-in received wide public and media attention. Many other unions and associations in the film industry sent supportive telegrams. Le devoir, a daily newspaper, suggested that a 1962 bill on the film industry was halted by an "influential visitor from Ontario" (possibly an MPEAA representative). Quebec's minister for cultural affairs made no promises about when he would present a new bill on the Quebec film industry and went on to say, "We cannot allow this sit-in to disrupt normal film distribution or the normal functioning of the cinemas."83 After eleven days of intense political battle, the minister agreed to negotiate with the filmmakers. But on the same day, the provincial police moved in to evacuate the filmmakers one by one. As they were being dragged out, they shouted "Les ordres," recalling Michel Brault's film of the same title, which dramatized the suspension of democratic rights by the federal government in 1970. The eventful Christmas of 1974 passed by without a film law to preserve the Quebec film industry. On the federal level, the secretary of state chose to ignore the suggestions of the Canadian film industry and follow the advice of the American film industry cartel and Canadian theater owners. Al162

State Intervention

though it was against their interest to join forces with the dominant exhibitors and distributors, the independent exhibitors did so to avoid any additional tax on their revenues. They wrote letters to their members of Parliament protesting any such proposal to support film production.84 It is not known whether the CMPDA organized the campaign as it had done before. Instead of a legislated screen quota and a box-office levy, a compromise had been reached. It was one that had failed to produce favorable results for the Canadian film industry in the past. The minister announced in August 1975 that he had signed agreements with the two dominant circuits in Canada to exhibit Canadian films voluntarily for four weeks per theater per year and a voluntary investment in Canadian films of $1.2 million for Famous Players and $500,000 from Odeon Theatres in the coming year.85 Once again the American lobby had been effective in preserving the status quo in the industry. Such voluntary screen quotas, negotiated by three secretaries of state since 1966, had failed to produce any favorable results for the Canadian film industry.86 The 1975 agreements were different only in the sense of specifying the number of weeks per theater made available to Canadian films. The agreements stipulated theaters but not screens, and, moreover, they were not specific to individual films. These measures infuriated the Canadian film industry, which was faced with serious unemployment, particularly in the production sector.87 The federal government time and again had seen the need for intervention but chose to negotiate with the MPEAA's Canadian arm, the Canadian Motion Picture Distributors Association (CMPDA). In September 1976, the Canadian government appointed a new secretary of state, and the scenario developed in this chapter was repeated. John Roberts, the new minister, held out much promise to the Canadian film industry, but the contradictory forces of the MPEAA, the continentalists in the government, and certain sections of the film industry influenced his film policy. Expecting a confrontation with the nationalists in the film industry, the MPEAA strengthened its lobby force by hiring a full-time executive director to head the CMPDA and a management consulting firm with good connections in various government departments.88 Roberts pursued the age-old approach to solve the problems of the industry. In a draft film policy which was to be presented to the Cabinet, Roberts reported that he was negotiating with the MPEAA to persuade them with "moral suasion or fiscal measures" to provide for an equitable distribution of Canadian films in the Canadian market.89 It took him almost two years to prepare his film 163

Canadian Dreams and American Control

policy. Addressing the Standing Committee on Broadcasting, Film and Assistance to the Arts in 1978, Roberts stated: A continuing concern to me is the degree to which the revenues generated at the box office in Canada are drained out of Canada and contribute very little to the financing of Canadian productions. . . . I have discussed these concerns with both the CMPDA and its parent MPAA. I have also brought home to them that the present imbalance of rentals and the returns on investment for Canadian productions cannot endure. . . . I intend to assess over the next twelve months their practical response to the problem I have described and to judge to what degree they have met our concerns.90

Millard Roth, Executive Director of The CMPDA, declared that Roberts's film policy was "consistent with a lot of the views which we presented." Expressing surprise at the time limit set by the minister, he stated, "I don't think that we alluded to a 12-month time period."91 The MPEAA lobby efforts had succeeded again in stalling any radical restructuring of the industry. To head off any regulatory moves by Roberts, the CMPDA submitted a document to his ministry almost a year before he announced his policy which identified nine points related to the demands made by various groups in the Canadian film industry. Stressing that the Canadian markets should be left free and open for member companies, the CMPDA promised to promote participation by its members in producing Canadian films, training promising Canadian filmmakers by successful Hollywood producers and directors, and a script development program. The document emphasized that if Canadian films were produced with North American (meaning U.S.) market in mind, the existing level of investment in Canada from public and private sources would be adequate and that no new tax on the box-office revenues would be necessary.92 On November 1, 1977, four months after the document was submitted to the minister, Jack Valenti (President of MPEAA), Millard Roth, and George Heiber (president of CMPDA) met with John Roberts and reportedly struck a deal: "The result of that meeting was an agreement that as the quality of Canadian pictures continues to rise, the prospect of more distribution of Canadian films outside Canada must be the objective."93 To that end, the CMPDA agreed to help Canadian producers to get their pictures screened by prospective American distributors. These tactical moves and public relations gimmicks by the MPEAA were reminiscent of the Canadian Cooperation Project of the 1940s. Their objective was to maintain the status quo in Canada's film 164

State Intervention

Jack Valenti, president of the Motion Picture Association of America, 1967-present. (Courtesy of Hazel Field © 1988.) industry, which they accomplished. The new Canadian film policy was hardly new. Negotiations with the MPEAA, voluntary quotas, voluntary investment, all proven to be a smoke screen, continued. It looked as though the Canadian government had bought the proposals of the MPEAA completely. Defending his policy at a press conference in Ottawa, John Roberts said, "If we apply drastic measures in Canada, we may risk not having the means necessary to create a stable, profitable basis for Canadian film outside of the country."94 He ignored the fact that Canadian films had no stable, profitable basis inside the country and appeared to believe the MPEAA argument that more Canadian films would be marketed abroad if their "quality" improved. The industry had hoped for a legislated screen quota and a levy for two years, and Roberts's policy announcement was like an elephant giving birth to a mouse. The doors to Canada's theatrical markets remained wide open. The sensitive position of the Canadian government, the power of the American film industry lobby, and competing priorities within the federal government once again determined national policy. 165

Canadian Dreams and American Control

Roberts's proposal in November 1977 to the Liberal Cabinet consisted of a 10 percent tax on the American distributors' annual gross rental revenue from non-Canadian films in the Canadian market and a rebate conditional on their distribution of Canadian films at home and abroad. This fiscal measure was strongly opposed by the finance minister, Jean Chretien, who was reported to have been under pressure from the MPEAA lobby and also the U.S. State Department.95 According to Maclean's, a Canadian weekly magazine, the U.S. State Department knew that Roberts's proposal would not win the approval of the Cabinet. However, a junior officer called on the Canadian embassy in Washington, D.C., to make it clear to the Canadian government that the American government would not like it if the tax measure passed the Cabinet. The CMPDA spelled out the threat of U.S. retaliation in a brief submitted to the Department of Finance: [The] U.S. are likely to regard any significantly discriminatory taxation of the industry by this country as being capable of being regarded in the international community as a precedent. There would appear to us, therefore, to be a real risk of a serious U.S. reaction that would not necessarily be limited to the taxation of film royalties, indeed, the field of taxation.96

The strategy of the MPEAA in all foreign countries has been to shape film policy in favor of member companies. In the case of Canada, the carrot at the end of the stick was, as in other countries, the possibility of Canadian films being distributed in the most profitable market in the world, the United States.97 The secretary of state, knowing that the American film industry would not risk losing Canada, its largest single foreign market, forewarned the finance minister when he presented his tax proposal: "The foreign distributors will rise up violently against the fiscal measures and will use their influence in Washington. The American government will probably threaten to take measures of reprisal, notably to exclude Canadian films from the American market."98 The threat was a farce if we consider the number of Canadian pictures the MPEAA companies had distributed in the American and other markets in the past. The finance minister did not approve the tax, and the 1978 version of Canadian film policy had no significant protective measures favoring Canadian films. The fragile Canadian political and economic entity was once again exploited by the MPEAA to continue its domination of the Canadian feature film industry. A Conservative government was elected in the federal elections of 1979. The new secretary of state, David MacDonald, set up a commit166

State Intervention

tee to study the "shape and future of cultural policies for Canada" and "to make recommendations addressing immediate and long-range problems, and to propose a set of guiding principles which will give governments a basis for decision-making in the years ahead in the fields of cultural activity that reach into the lives of all Canadians."99 The committee considered quotas and levies but did not approve them. Instead, it recommended an expanded role for the CFDC in financing film production and a subsidy to Canadian-controlled distribution companies to strengthen that sector.100 The battle to gain control of the Canadian film industry was once again staged in the 1980s on several fronts in Canada. It first surfaced in a proposed cinema law in Quebec, presented by the Parti Quebecois government which had been elected to power on the platform of preserving Quebec language and cultural identity. The federal government also jumped in with its own bill to protect indigenous distributors, thereby strengthening the film industry. These issues became central to the free trade talks between the United States and Canada. The contradictory forces that shaped Canada's policy historically would once again play a role in determining the shape of national cultural policy. We will return to those issues in Chapter 8. The policymaking pattern of the government, analyzed in this chapter, has been one of trying to meet conflicting demands made on the state by the international capitalists (the MPEAA), indigenous capitalists (investors, producers, and independent exhibitors and distributors), and the industry workers. The workers and small capitalists (independent distributors) joined forces to push for national control of Canadian cinema, whereas Canada's prominent capitalists (national theater chains) and the international capitalists sought the cooperation of various sections of the state machinery to keep their control intact. While arbitrating these forces of power in Canadian society, the state rhetorically spoke of national control but did little to accomplish it. By emphasizing the development of the private sector in feature film production, the state preserved Canada's dependent capitalism. The Canadian government recognized, time and again, that the present industry structure and market relationships weighed against independent Canadian production and distribution companies. But it failed to restructure the industry favoring the indigenous enterprises, particularly in distribution. Since 1974, the government has tried to pressure the MPEAA to yield screen time to Canadian films, but failed as those initiatives were not backed by legislation. When the indigenous capitalists pressed for legislation to gain access for Canadian 167

Canadian Dreams and American Control

films to Canadian screens, the government succumbed to the lobby from the international capitalists. Instead of a screen quota, the Canadian film industry received what the MPEAA had pushed for all along. The government's declared goal of creating a national cinema to reinforce Canadian identity through the Canadian Film Development Corporation collapsed, thus pumping more money into production of films, primarily intended for profit-making purposes. The U.S. film industry has preserved its domination of the Canadian feature film market with the assistance of the U.S. State Department which has helped it take advantage of Canada's economic and political dependence. The Canadian government's sensitivity to a possible U.S. retaliation which may envelope the whole political economic fabric of the country has significantly influenced film policy. It has failed to restructure the film industry, which the government knows is necessary. Incentives for film investors have, however, been created which amount to subsidizing the American film industry. We turn to these issues in the next chapter.

168

5. Tax-Shelter Policy and the Industrialization of Canadian Cinema The Canadian government was in a political and economic situation in which the demands of certain elements of indigenous and international capital were in conflict, and mechanisms to create access to Canadian theaters for locally produced films were not legislated. By 1974, Canada's attempt to create an indigenous film culture that would provide opportunities for Canadian talent was in jeopardy. The militancy among workers was heightened by the government's failure to find solutions to the fundamental problems of the industry. The American film industry lobby had argued that lower-budget films produced in Canada did not fit their marketing pattern, and if Canadian films with mass appeal had certain technical gloss, there would be no problem. The government of Canada responded to these arguments with a tax-shelter mechanism to stimulate private investment, thereby putting the troubled Canadian film industry on the decisive course of industrialization. This chapter examines the tax shelter and its implications for an indigenous cinema in Canada by asking the following questions: (1) Which objectives were achieved, and which failed? (2) What were the benefits to Canada, and to whom did they accrue? (3) What were the disadvantages to Canada and its people? 169

Canadian Dreams and American Control

The Capital Cost Allowance Program (CCA) Private investment in film had been encouraged since 1954 by the government of Canada through a 60 percent capital cost allowance. A taxpayer who invested in a film was eligible to deduct 60 percent of that amount from taxable income (from all sources) in the year the film was made. No distinction was made, however, regarding the origin of the film (or later videotape).1 Therefore, there was no incentive for Canadian investors to risk capital in locally made films. Given the problems of market domination by the American majors, they were further encouraged to invest outside Canada. In 1974, amid the cries of national autonomy from the film industry, the government increased the tax write-off to 100 percent for Canadian feature films.2 By November of that year, the government defined the term Canadian for the purposes of the CCA, thereby creating a new source of investment for feature film production in Canada. To be certified as a Canadian feature film, the producer and not less than two-thirds of the following key creative positions were to be held by Canadians: director, screenwriter, art director, director of photography, editor, music composer, highest-paid actor or actress, and secondhighest paid actor or actress.3 This was a compromise between stricter rules demanded by the workers in the industry and a more flexible approach desired by the financiers and producers of films.4 This policy left the door wide open for investors to seek out the presumably low-risk foreign (American) films rather than high-risk Canadian films. The Canadian film industry organizations lobbied the government to change the CCA rules, which failed to distinguish between Canadian and other productions. In May 1976, the rules were amended to discourage investment outflow and to encourage investors to employ more Canadians. Additionally, the CCA was extended to certified short films and videotapes, thereby broadening the area of activity for potential investors. For non-Canadian productions, the CCA was reduced to 30 percent, to be claimed only against income from those films and taped productions. The government modified the point system by assigning a certain number of points for each key creative position: director and screenwriter carried two points each; art director, director of photography, editor, music composer, highest-paid actor or actress, and second-highest-paid actor or actress were each assigned one point. To qualify for certification, a film or videotape had to receive at least six points out of a total of ten. This was to make it attractive for investors to hire Canadians to fill important positions. 170

Tax-Shelter Policy

The Canadian government's 100 percent tax-shelter policy of 1976 coincided with the U.S. government's abolition of similar film tax shelters.5 As a result, American film investors began to flock to Canada. Additionally, the devaluation of the Canadian dollar in relation to the U.S. dollar lowered production costs for U.S. investors, all of which meant that American investment dollars were abundantly available. According to a newspaper report in 1978, an unprecedented sum of $40 million to $50 million was spent in Canada on feature film production.6

Implications of the CCA While the government's short-term objective for the CCA was to stimulate investment in Canadian feature films, the long-term goal concerned industrial, economic, and cultural aspects. They were outlined by the minister of communications as follows: There is an industrial objective that aims to develop and strengthen the film industry with regular sources of financing and sufficient cash flow to maintain production and encourage further investment. The economic objective of the program has been underlined by the fact that a number of amendments have been implemented in order to ensure that, as the industry develops, a greater share of investment remains in Canada and a greater proportion of key creative personnel are Canadian. Finally, a cultural objective exists to encourage the production of films that will be distinctly Canadian and will have a cultural impact.7

The CCA was the means to create a supply of capital for film production which otherwise was unavailable. Unlike their U.S. counterparts, Canadian banks were reluctant to finance feature films given the high uncertainty of profitability in a market preempted by imported films. In the rare cases when banks loaned money to producers, it was usually secured against fixed assets.8 The tax-shelter funds replaced bank financing. The government hoped the policy would create jobs and also fulfill cultural objectives. As we will see, the objectives were in conflict, given the emphasis placed on industrialization. Data for the thirteen years since the 1974 revisions to the CCA are presented in Table 12. It includes only the productions certified as Canadian. Productions that were ineligible or not submitted for certification are omitted. In the feature film sector, a total investment in 432 171

Table 12 Certified Productions by Year and Budget, 1974-1986 Year of completion 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 TOTAL

Appl.

Budget ($)

TV Productions

Shorts

Features Appl.

Budget ($)

Appl.

Budget ($)

TOTAL

Appl.

Budget ($)

3 18 33 37 37 66 53 43 30 29 40 38 5

1,581,245.00 6,677,693.00 19,190,415.00 35,217,686.00 48,660,913.00 171,777,598.00 147,383,641.00 64,083,765.52 34,556,822.00 19,963,637.00 36,854,500.27 56,854,122.00 17,344,093.57

0 1 34 72 93 156 179 156 103 90 87 89 40

0.00 5,985.00 6,202,869.00 14,113,835.00 15,665,518.00 39,037,302.00 62,905,801.00 69,139,596.00 31,930,806.00 23,875,927.00 42,463,141.54 78,925,900.99 28,983,584.71

0 0 0 0 0 0 0 0 0 0 0 0 120

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 142,752,898.04

3 19 67 109 130 222 232 199 133 119 127 127 165

1,581,245.00 6,683,678.00 25,393,284.00 49,331,521.00 64,326,431.00 210,814,900.00 210,289,422.00 133,223,361.52 66,487,628.00 43,839,564.00 79,317,641.81 135,780,022.99 189,080,576.32

432

660,146,131.36

1,100

413,250,266.24

120

142,752,898.04

1,652

1,216,149,295.64

Source: Canadian Film and Video Certification Office.

Tax-Shelter Policy

features amounting to approximately $660 million was eligible for taxshelter purposes. Not only did Canada produce more feature films because of the tax shelter, peaking in 1979 with sixty-six certified features, but the average budget of a feature film rose dramatically. From an average of approximately $527,000 per film, it went up to $2.6 million in 1979 and $3.5 million in 1986. Budgets of $4 to $6 million became common in the industry. We can observe similar growth in the area of short film production also. In the thirteen years, a total of $1.2 billion was invested in eligible feature film, short, and television serial productions. The tax-shelter mechanism clearly influenced greater investment in films over these thirteen years and also led to higher budgets. The government claimed that the CCA succeeded in creating employment in the film production sector. As of March 1978, sixty-seven feature films were certified to qualify for the tax shelter, of which eight were coproductions with other countries. The policy of coproductions is examined in Chapter 6. According to a government report which analyzed the remaining fifty-nine features, the CCA policy was a success in generating jobs for Canadians: 92 percent of the directors working on the CCA films, 84 percent of the screenwriters, 86 percent of music composers, 100 percent of art directors, and 97 percent of directors of photography were Canadian.9 However, only 54 percent of the highest-paid actors and 73 percent of the second-highest-paid actors were Canadian. Of a total of 428 key creative positions, 367 (or 86 percent) were held by Canadians.10 Undoubtedly, many jobs were created by the CCA. Graph 1 shows the number of jobs held by Canadians and nonCanadians in CCA films for the years 1974 to 1983 for which data were available. Clearly, in all the key creative positions, Canadians fared well, including the highest-paid actor and second-highest-paid actor. What these data do not reveal is the ingenuity with which investors undermined the Canadian cultural objectives of the CCA policy. Many leading roles were played by American stars, some of whom were expatriate Canadians living abroad. RSL Films produced Agency (1979) with Robert Mitchum and Lee Majors; Astral Bellevue Pathe Limited produced City on Fire (1978) with Barry Newman, Susan Clark, Shelly Winters, Ava Gardner, and Henry Fonda; Greater Film Ventures Inc. produced Murder by Decree (1978) with Christopher Plummer, Donald Sutherland, and Genevieve Bujold. The old commercial strategy of using well-known star commodities to overcome barriers to entry was 173

Canadian Dreams and American Control

Graph 1 Total Number of Key Creative Personnel for Certified Feature Productions, 1974-1983

Source: Canadian Film and Video Certification Office, Statistical Bulletin, 1974-1983, p. 8.

employed in making these films. A different logic of film production operated here, as opposed to making films for Canadian audiences with Canadian themes, concerns, and talent. It is the logic that operates in commercial cinemas around the world where films are made to appeal to mass audiences. There were other problems with the CCA films as well. The CCA investors were reluctant to hire Canadian writers who were not coached in the Hollywood style of production. The same was true in the case of producers, as Canadians had seldom mounted productions costing several million dollars until the late 1970s. While imported producers and screenwriters carried out the work, Canadians were often hired simply to lend their names to the credits in order to comply with the CCA rules. Private investment capital was organized by banks and investment houses with little experience in film production. Overnight, producers 174

Tax-Shelter Policy

and packagers arrived to promote projects, to exploit the CCA for its tax advantages. It became possible for an individual in the 50 percent tax bracket in Canada (taxable income exceeding $27,000 in 1974) to invest in a film project and derive a 20 percent tax saving on the investment in the first year and a 48 percent tax saving the second year on the declining balance. Doctors, engineers, lawyers, and other professional people were drawn into the film industry to take advantage of the tax shelter. Looked at in another way, a few wealthy investors were given the tax advantage, and the opportunity, to provide a pool of capital not otherwise available in a market dominated by foreign oligopolies. While the CCA attracted thousands of investors to feature films, the high fees charged by investment brokers, lawyers, and accountants, over and above the high salaries paid to "international" stars, escalated production budgets, and many films simply became vehicles for those individuals to make a "quick buck."11 Eventually, Canadian investors became wise to such abuses, which led to a crisis in 1980 when the taxshelter funds nearly disappeared. Canadian nationalist groups in the industry pressured the government for a major overhaul of the CCA rules to make them more stringently Canadian. The industry, however, was not unified on this front. The CCA policy essentially supported the idea that individual entrepreneurs motivated by the lure of profits would seek out the needed capital and talent to make films in Canada. It created a class of producers that did not exist in Canada before, who, although Canadian in nationality, looked outside the country (to the U.S. market) for profits. They spoke the language of the capitalist cinema, and their orientation was the industrial model from the United States. To them, a script was a property or speculative artistic collateral. They were entrepreneurs who "packaged" film properties, just as an automobile is assembled. They stood in direct contrast to filmmakers who thought of film as a mirror of society and an artistic endeavor for selfrealization. These entrepreneurs argued that the demands of the U.S. film marketplace should outweigh any "narrow" nationalistic or artistic concerns and that CCA policy should remain flexible if it intended to create an industry. Essentially, the view of the producers dominated policymaking as it was consistent with the industrial and economic objective of the CCA. In 1980, the government circulated a discussion paper to seek various viewpoints from the industry before altering the CCA rules. None of the proposed solutions excluded the participation of foreign talent in the CCA films. Variety reassured investors that the government 175

Canadian Dreams and American Control

would not disrupt the significant participation of American talent or partnerships between Canadian and American producers.12 The government recognized the various abuses of the CCA by producers in its discussion paper and also the mounting pressure from the industry to amend the rules: Pressure is increasing from the industry, on the one hand, to bring the capital cost allowance program more into line with the realities of film production in Canada while protecting its underlying cultural value and, on the other hand, from the investment community to provide a more controlled and stable environment.13

It was widely reported in the press that the film industry faced the worst crisis in its history as investor confidence had been shaken. By the end of 1980, the producers expected to raise a total of $150 million by selling limited partnership units in proposed feature film projects. However, $40 million units were not sold.14 The producers primarily wanted a stable taxation policy so that investors would not be scared away from films. The actors and technicians demanded jobs and recognition, whereas the directors and nationalist groups desired genuine Canadian control of CCA films. Faced with such conflicting demands, the government chose to support entrepreneurs rather than the backers of Canadian control. By creating jobs, it hoped a section of the industry would be satisfied. The government allowed some flexibility to the Certification Office to interpret the rules and to make exceptions when necessary. For example, two points were assigned to the category of screenwriter even if two writers were hired, as long as one was Canadian. Similar concessions were made to the producer category. As long as a Canadian was hired as an apprentice to the producer, the film project received two points for the producer's category from the Certification Office.15 Once again, the government attempted to encourage investors to hire more Canadians. In 1982, bowing to pressure from nationalist groups, the government required that either the director or the screenwriter and one of the highest- or second-highest-paid actors be Canadian. It also began to award extra points if the film's screenplay was based on a Canadian author's work and the principal screenwriter was Canadian.16 Having created a policy framework intended to accomplish industrial and cultural objectives, essentially in conflict with each other, the government was engaged in a balancing act between the two. A comprehensive picture of the impact of the CCA on Canadians versus non-Canadians is indicated in Table 13. It provides a breakdown 176

Table 13 Breakdown of Costs for Certified Feature Production, Canadian and Non-Canadian Key Creative Personnel

1974 1975 1976 1977 1978 1979 1980 1981 1982 1983

Services

Labs

Canadian

Non-Canadian

Canadian

Non-Canadian

Canadian

Non-Canadian

161 780 1,058 1,937 2,233 11,336 9,041 2,819 443 352

101 322 1,528 1,667 2,108 18,577 8,398 2,103 413 110

741 3,303 4,893 9,284 10,210 60,807 47,565 17,318 2,976 3,632

58 146 871 1,188 1,575 8,858 6,337 3,148 193 460

146 1,010 1,852 2,890 3,104 11,838 6,244 2,741 628 411

0 54 232 144 132 760 581 208 28 26

Source: Canadian Film and Video Certification Office, Statistical Bulletin, 1974—1983, p. 6. Note: All amounts are given in thousands of Canadian dollars.

Canadian Dreams and American Control

of where CCA funds were spent and the number of jobs allocated to Canadians. The Canadian service sector—laboratories, studios, hotels, equipment rental—were the major beneficiaries when compared with the category of key creative personnel. Canadian creative workers employed in the CCA films received less when compared to foreign workers. These data confirm the reports in the popular press of abuses by CCA producers. In 1979, the peak year of CCA production, nearly two-thirds of the funds were spent on non-Canadian creative workers. These data do not include remuneration paid to producerrelated functions. If such information was available, Canadians may fare a little better. Although these data suggest that the CCA policy created an unprecedented level of economic activity in the Canadian film industry, it is hard to tell whether the objective of building a capitalist film industry was a success. Viability for an industry based on the profit motive is largely determined by whether or not those films recoupe their investment. Profitability is also a factor of market access—both domestic and foreign. Table 14 suggests some patterns of how the CCA films, certified in 1979, were received in the distribution and exhibition markets. Of the forty-five films analyzed, twenty-two were released, and only five were considered commercially successful. As of April 1982, three years after the completion of the pictures, twenty-one films were not released. It suggests that more than half of the films were unacceptable to the distributors in terms of commercial potential. This pattern may be consistent with other capitalist film industries where not all films are released. The rule of thumb in the American film industry is that the majors' films get released, as they are principal gatekeepers in the market. However, commercial success is not guaranteed. Generally speaking, 20 percent of films released in the U.S. market make a profit. In the Canadian theatrical film industry, given the difficulties of domestic and foreign market access, the risk was even higher. Only two of the forty-five CCA films in 1979 were classified as having achieved the cultural objective of the policy. The producers of the CCA films sought American mass audiences for profitability. Not only were leading roles played by U.S. stars, as noted before, but some of the CCA films attempted to wipe out any spatial or cultural connections to Canada—Toronto masqueraded as Washington, and Montreal became Chicago. The CCA's impact on Canada's film industry was dramatic in Quebec. Given the more limited market for French-language films, there was no incentive for investors to get involved in Quebec films. In 1978 and 1979, two-thirds of the films 178

Tax-Shelter Policy

made in Quebec were produced without benefit of the tax shelter.17 Film directors who in the 1960s helped put Canada on the world film map—such as Claude Jutra, Gilles Carle, Michel Brault, Denys Arcand—were unable to get financing to make any French-language films. Jutra made Surfacing in English. As the critics of the CCA correctly pointed out, the industrial objectives of the government failed to create a national cinema that gave expression to Canadian issues and problems.18 The fact was that the CCA was not intended to develop a national cinema. The Canadian government chose this policy after voluntary screen quota and investment policies had failed to produce any significant benefits to Canadian films. The CCA was a means to achieve what the government had not been able to do. If American distributors could not be persuaded to distribute Canadian films (which used to be low-budget), why not encourage Canadian and other investors to finance high-budget films acceptable to the American distributors? In other words, if Canadian capital was not allowed to participate in the film industry in a profitable manner (by virtue of not having free entry into the distribution and exhibittion markets), support it and make it profitable by paying out of the public purse. The outlook became even better for Canadian capitalists if the American film industry could be persuaded to distribute the films. The tax write-off policy was historically consistent with the Canadian government's hands-off policy regarding the American film industry monopoly power in Canada. It was a no-branch-plant system, or a hit-and-run branch plant system.

CFDC Shifts Course Critics of the CCA argued that by producing films acceptable to American distributors, genuinely Canadian films would be forced to play in art houses and film festivals. Consequently, they would not reach mass audiences. This argument was valid to a large extent, if we consider the investment policy of the CFDC in the late 1970s. According to Michael McCabe, executive director of the CFDC, "It is no longer feasible to make films that will only be seen by a handful of people. If it takes stories with wide appeal and international stars to reach screens around the world, then that's what we'll invest in."19 The CFDC was asked by the secretary of state in 1978 to "establish a 179

Table 14 Certified English-Language Feature Films, 1979 Not yet released9

Test-marketed onlyb

This Time Forever Meat the Cleaver The Intruder Double Negative Deadline Crunch Parallels Autumn Born Off Your Rocker Teddy Babe Never Trust an Honest Thief Different Strokes South Pacific 1942 Blood, Sweat and Pride High Point Skating on Thin Ice

Title Shot Final Assignment Finishing Touch Read On

Released, no commercial success

Released, commercial success0

Pinball Summer Hog Wild Agency Under the Cover Cops Phobia Klondike Fever

The Changeling Prom Night Terror Train Scanners Middle Age Crazy

Kidnapping of the

President Nothing Personal Bear Island Tulips Improper Channels Dirty Tricks Tanya's Island Silence of the North Mondo Strip The First Hello The Last Chase

Canadian themed Surfacing Suzanne

Table 14 Certified English-Language Feature Films, 1979—Continued Source: Canadian Film Development Corporation. a

Not released in theaters as of April 1982. Other Canadian feature films produced subsequently, such as Ticket to Heaven and Quest for Fire (coproduction), have been released and have achieved commercial success as defined in note c.

b

Test-marketed only; general release may or may not follow.

c

Commercial success defined as wide distribution and favorable public response, though not necessarily full recoupment to investors.

d

Canadian subject matter or other significant Canadian cultural content. Neither film listed attained commercial success. Some films not listed under this heading have Canadian settings that are identifiable as such.

Canadian Dreams and American Control

network for screening feature films in motion picture theatres, school halls, and other auditoria in order to provide a commercial outlet for films of cultural significance which existing theatres are unwilling or unable to exhibit."20 That policy was a complete reversal from what the secretary of state had emphatically stated about films when the CFDC bill was passed: "Motion pictures are an important element in our cultural life. They should serve a national purpose and reinforce our Canadian identity."21 Instead of doing something about the structure and the market relationships in the industry, which the government recognized as the main obstacles to development of a national cinema, it opted to shore up the private, commercial production sector in Canada. The CFDC's role in the Canadian film industry was altered substantially after the introduction of the 100 percent tax shelter. One government study determined that private investors had over the years assumed a preeminent position in the film industry. Between 1958 and 1967, private investors or venture capitalists contributed only 18 percent of the investment in film production, with the balance coming from production companies, distributors, exhibitors, and foreign investors. With the founding of the CFDC in 1968, 37.5 percent of all the funds invested in films came from that agency, whereas the private investors' share dipped to 13.5 percent. With the 100 percent tax shelter, venture capitalists increased their share substantially as expected. Between 1975 and 1978, they contributed 47 percent of the total investment in Canadian films, while CFDC's contribution dropped to 15 percent.22 With the emphasis placed on reaching international markets for profits, the CFDC changed its policy of providing equity financing to lower-budget Canadian features to one of providing interim or bridge financing to CCA films. It acted like a private bank looking to investment brokers for recoupment.23 These were important policy shifts which gave rise to the problem of denationalizing Canadian-made films. The policy of encouraging the capitalist production sector to grow was an outcome of the government trying to meet conflicting demands from the international capitalists (MPEAA member companies), the indigenous capitalists (investors, independent producers, independent distributors, etc.), and the workers in the production industry. The tax-shelter policy seems to have satisfied the international capitalists and a section of the national capitalists. Additionally, as there were more jobs in the production sector, workers were generally satisfied. 182

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The national capitalists and the workers were not unified among themselves with respect to the CCA. A section of the national group sided with the international capitalists, and another section looked after its own national interests in opposition to the international capitalists. These divisions were apparent in a group such as the Canadian Association of Motion Picture Producers (CAMPP) which represented the production interests. A section of these producers believed that Canada could develop a viable film industry if it produced only internationally acceptable films, a view that was remarkably similar to that of the MPEAA. A smaller section of CAMPP argued that Canada should make films that are expressions of Canadian culture and pointed out that the so-called international films were merely imitations of Hollywood films (e.g., City on Fire, The Silent Partner). They further argued that such films may get distributed worldwide only when the American distributors do not have their own or other films to distribute. Canadian labor was similarly split but was customarily willing to side with whoever offered a job, and, in this case, it could only choose between the national capitalists and the international capitalists.

Independents' Dilemma In this turbulent environment of the film industry, the independent Canadian distributors had become uncertain of their future. The sale of Meatballs in 1978 to an American major by Cinepix, a Montrealbased independent production and distribution firm, pointed out the problems faced by the independent distributors. The film cost $1.6 million to make, and Paramount bought the U.S. theatrical rights with an advance of $3.3 million.24 In a separate deal, the producers sold the Canadian theatrical distribution rights to the same U.S. distributor with an advance of $300,000.25 Andre Link, one of the producers of the film, stated that it was a difficult decision to make. Cinepix would have preferred to distribute the film by itself in Canada, but, with Canada's first-run market being almost inaccessible to the independent distributors, he had to make a pragmatic choice between potential loss and ensured profits. Link explained what the Canadian rights sale meant to Canadian independents: "It means hard times. Canadian distributors won't get the better pictures. There is not one Canadian company which could write a check for $300,000 today, and the 183

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situation won't change until there is a point count for a distributor in the definition of Canadian film."26 This controversy led to intense lobbying by independent distributors in Canada, who felt that if the trend continued the distribution rights of all big-budget pictures would be sold to the American majors. According to the independents, those big-budget pictures might have opened up the Canadian first-run market for them. They argued that unless they could distribute big-budget productions, Canadian content pictures were all they would have left to distribute. This, they contended, meant a further deterioration of their already weak position in the domestic market. The argument was weak, given the fact that American distributors monopolized screen time and would not relinquish their control in the absence of a screen quota. With the major circuits placing their allegiance with the American film industry first, Canadian-content films would not get wide distribution in the domestic market. The government faced a difficult policy problem in this regard. If it supported the independent distributors who did not possess any play dates with the major circuits, the investors and producers of the films would be unhappy. The investment dollars would eventually dry up. It would mean that the government would have to do something about American film industry control of distribution and exhibition markets in Canada. The government chose to disregard the concerns of the independent distributors and pushed forward with its policy of encouraging the U.S. distributors to acquire domestically made films for distribution in the national and foreign markets. The sale to Universal of another big-budget picture, Running, in 1979, further angered the independent distributors. The film was budgeted for $3.65 million in Canadian funds of which $500,000 came from the CFDC. It starred Michael Douglas and Susan Anspach, both Americans, and was shot in Toronto and New York. Clearly a film made for American audiences, it reflected CFDC's changed policy of making films suitable for majors' global distribution. Universal paid an advance of $2.25 million in U.S. funds plus a percentage of gross rentals. The producers, Robert Cooper and Ronald Cohen, had also negotiated a contract with the ABC-TV network for $2.25 million and U.S. cable, pay-TV, and world syndication rights to Viacom for $1 million. Total revenue from all these deals brought in $5.55 million, or approximately $6.4 million in Canadian funds.27 This was the biggest deal yet for any film made in Canada. According to Mickey Stevenson, head of Astral Films, the largest Canadian-owned distribution company, no Canadian distributor could outbid one of the majors.28 As the 184

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government was following the policy of encouraging big-budget pictures made for international markets, the independent distributors were the losers. Some critics argued that publicly financed films such as Running should be handled by a Canadian distribution company in the domestic market. Others claimed that if American companies were to become involved in distribution and production of films in Canada, it would amount to Canadian taxpayers subsidizing American companies. Critics pointed to Silence of the North, another film made in 1979 by Universal Pictures in Canada. It was the first Canadian film sponsored by a leading American company to get the CCA certification.29 It was budgeted at $8 million (Canadian), half of which came from Universal's profits in Canada, and the rest raised through a public offering of limited partnerships.30 Based on the true story of a pioneering woman in northern Alberta, the film was directed by Allan King, a noted Canadian documentary and feature filmmaker. Richard Leiterman, another award-winning Canadian, directed the photography. The film was shot on location in Alberta and at studios in Toronto. As a result, it was certified by the government as Canadian and became eligible for the tax shelter. Was this a subisdy to the American corporation from the Canadian taxpayer? Obviously it was. But the government may have intended that if a strong private production sector could be created, even if it amounted to subsidizing American corporations, it was the right policy. The big-budget cinema set the pattern for film production in Canada. Because of the CCA, higher-budget pictures with box-office stars such as Elliot Gould, Sophia Loren, and George C. Scott were being made in Canada. Some were distributed by American major companies domestically and internationally. It meant increased potential for profits by the Canadian and other investors. It also meant that Canadian films, generally speaking, would be of high technical quality. But at the same time, it meant that they would look more like American films. The Silent Partner and A Man Called Intrepid just happened to have been made in Canada, but they could have been made anywhere in the world. The films of Canadian directors—Claude Jutra (Mon oncle Antoine, Kamouraska), Don Shebib (Goin' Down the Road, Between Friends), Jean-Pierre Lefebvre (Les maudits sauvages)—were personal visions and commentaries on living in Canada. They were thus relevant to the country in which they were made. These and other films that gave Canadian cinema a distinct identity became rare and, as in the past, limited to a specialized audience. 185

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B-Movie Capital The CCA policy did nothing to elevate the genuinely Canadian films from their relative obscurity and establish them in the commercial distribution and exhibition markets. In fact, the entire CCA and CFDC effort was geared to encourage big-budget production, a policy consistent with MPEAA objectives. The majors had argued all along that Canadian filmmakers should give up nationally or culturally specific themes and treat their films as products made for a commercial purpose. Success at the box office was the principal goal which was possible by including international box-office success ingredients in films. In other words, unless Canadian films looked like American films, they were parochial and unacceptable to the MPEAA companies. The Canadian government's policy regarding what Canada should produce fitted the needs of the MPEAA better than the desires of the Canadian filmmakers. It was particularly advantageous to the MPEAA because the Canadian government would not restructure the market favoring independent distribution companies under such a policy. The majors could be selective about their investment, control it completely, and also set the pattern for what enterprising Canadian producers would turn out. The CCA policy placed the MPEAA companies at a no-risk position, as they did not have to invest compulsorily in Canadian production. Given the uncompetitive position of the Canadian-owned distributors, the net effect of this policy was strengthening the monopoly power of the American film industry in Canada. Only the most potentially successful films would be picked up for distribution by the American majors, which amounted to having a reserve of independently made films in Canada. Canada aptly came to be called the B-movie capital. The government's declared goal of creating a national cinema to reinforce Canadian identity through the Canadian Film Development Corporation was amended to promote the development of an industry primarily intended for profit-making purposes. The viability of the production sector, however, depended largely on the continuation of the generous 100 percent tax shelter for films and videotapes at the federal level and the 150 percent tax shelter in Quebec, both of which were in jeopardy by 1987. In its proposals to reform the income tax law, the Ministry of Finance reduced the CCA for certified productions to 30 percent. Investors could use the write-off mechanism to reduce their taxes only against their income from film sources.31 The Quebec government also proposed to reduce the provincial tax shelter. These 186

Paul Popowich as Cass in Tommy Tricker and the Stamp Traveller, directed by Michael Rubbo and produced by Rock Demers.

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announcements shook the foundations of the capitalist production sector. Rock Demers, a prominent producer who made five children's features between 1980 and 1987 (four of them with the assistance of tax-shelter funds), stated emphatically that the industry was "doomed" if the proposals went through.32 In his view, venture capital would disappear from film production to other, more profitable areas. Priorities of the Finance Ministry were once again in conflict with the Ministry of Communications. A high-risk industry based entirely on a taxshelter mechanism, given the conflicting agendas of various branches of the government, was fragile. Moreover, profitability for the CCA producers depended on international market access. The CCA mechanism, however tenuous, may have laid the foundations of a branch plant film industry in Canada. Since it is subjected to the priorities and needs of the American majors and the conflicts within the government, it is a hit-and-run branch-plant system at best. But some have argued in Canada that such a film industry is needed to create a world-class film culture in the country. What is at stake for Canadians (and others) in going along with the notion of world-class cinema? A great deal appears to be at stake if one's priorities are to build a distinctly national cinema. Ideology of World-Class Film World-class has become the buzz word of international film culture in recent years. The term connotes excellence and who in their right mind can challenge such a pursuit? Essentially, the high-budget, glossy American imitations are being legitimized under this dubious term. When the industry refers to a film as world-class, it usually points to a certain technical quality of the image or box-office ingredients such as star cast, behind-the-camera personnel, breathtaking locations, costumes, bigger-than-life sets, and eye-popping special effects, which make up the spectacle of Hollywood films. The typical budgets for these films range around $15 million to $17 million and, in a few cases, $30 million to $40 million.33 The rule of thumb in the American film industry is that to be profitable box-office revenues would have to reach at least 2.5 times the negative cost of the film. Given the limited size of the Canadian market, such revenues are potentially possible only if U.S. market entry is guaranteed, with the U.S. majors as the gatekeepers. The business of making motion pictures is then oriented to playing the game by the 188

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rules established by the dominant corporations. Moreover, the market priorities of U.S.-based transnational are foisted on all countries in the world wishing to create their own film industries. The simplistic, linear narrative technique observable in so many of the American films also becomes the norm for other filmmakers. The tempo and pacing in films, all inevitably leading to a narrative climax, form the rule that Canadian and other filmmakers have to follow. Canadian films such as Le chat dans le sac, Entre la mer et Veau douce, Coin' Down the Road, and Why Shoot the Teacher1? are judged to be too slow and unacceptable for distribution. The rough-edged Canadian independents' films explore not only film style but also political and social themes and characters often ignored in the mainstream commercial cinema. Canadians have developed a film hybrid that inserts documentary techniques into dramatic film and vice versa. Many Canadian filmmakers followed this route because they were trained at the National Film Board of Canada. There was a feeling among them that it was a more natural form to utilize.34 The stories for these independent films arise out of reality, as opposed to filmmakers imposing their view of reality on the world. For example, Sitting in Limbo (1986) focused on the problems of black teenagers. It employed actors with little or no training, and much improvisation took place on the sets. The central character is a rebel learning to cope with problems of growing up. He does not want to be tied down, but because his girlfriend becomes pregnant, he decides to mature. The character changes through a series of circumstances which are beyond his control. However, he cannot accept them. A strong sense of fatalism sets this apart from an American film. The prevalent myth in America is that an individual can change, can change the society, and can even change the world. Canadians make films about the problems of maturing young people because Canada is a young nation. It has progressed from a political colony of Great Britain to a cultural colony of the United States. This theme is addressed directly in My American Cousin (1986). It is the story of Sandy, a teenager from British Columbia who has her quiet rural life disrupted by the arrival of her older American cousin, Butch. He is the James Dean type, who agrees to take Sandy for a dusty ride on a dirt road in his big red Cadillac convertible. The film captures the real envy Canadians have of everything American and everything America represents as the land of hope and glory. Cousin Butch personifies it all. He is very brash, aggressive, confident, and good-looking. Besides, he comes with the flashy technology (car) that represents American advancement. He 189

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Lea Pool directing La femme de I'hotel. has everything Sandy likes. It is such films that have given Canadian cinema a separate identity from mainstream Hollywood. It is such films that the CCA investors were uninterested in financing, claiming that they were not world-class. This process, simply put, amounted to repression of individual expression of Canadian filmmakers by the abstract forces of the market economy. There are several filmmakers in Canada—young and old—who have a different conception of what national film culture ought to be, and it differs from the notion of world-class cinema. They are easily distinguishable from the crowd of "packagers" and "service" producers. Lea Pool has made three features since 1980: Strass Cafe (1980), La femme de Vhotel (1984), and Anne Trister (1985). Her first film was made with a $6,000 grant from the Canada Council, and the second and third films had institutional financing (Telefilm, SGDC, NFB, Radio Quebec) costing $500,000 and $1,370,000, respectively. No tax-shelter funds were invested in any of her films. They have all been critically acclaimed. Anne Trister, distributed by a Quebec company, ran for twenty-three weeks in one Montreal theater. It has been sold in thirteen countries, in both the theatrical and television markets.35 Pool's films deal with the process of creativity and the relationship people have with art. She uses her films to question her own work. For her, a film becomes a tool for self-reflection and an attempt at self-realization. She tells stories of people who are in exile, the internal questioning they endure, and the contemplation they experience. These are certainly not parochial issues, but they are universal. Pool spoke of the subtle pressures exerted on her by the agencies financing her films—while writing the script and during editing—to commercialize her ideas. She has struggled to stay honest. Gilles Carle, the renowned Quebec filmmaker, summed up the mentality of those 190

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Lafemme de Vhotel, with (from left) Louise Marleau, Paule Baillargeon, and Marthe Turgeon. who strive for world-class cinema: "Their cause is the commercial cause. It is servility to a style that caters to unthinking, spoiled kids who like Madonna."36 The new artistic sensibility demanded by world-class film presupposes that any issue that is intrinsically national in other countries will be of no interest to American mass audiences. Complex sociopolitical events are shaped by great men (as in Richard Attenborough's Gandhi), and in simplifying complex reality, key issues that may have several interpretations, characters, or story lines are marginalized at best and eliminated at worst.37 World-class film demands that history be cannibalized and presented through a prism that assists in simply entertaining Americans but not necessarily moving them to action. Subscribing to the ideology of world-class film reinforces the subservience of second-echelon film-producing nations. Reclaiming and reinterpreting history ought to be a high priority for decolonized nations. Films and other media can play a vital role in that process, but if the films are made to profit from the American market, they can hardly 191

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serve such a purpose. For instance, David Lean's A Passage to India and the television mini-series Jewel in the Crown, both 1984 releases, are not Indian interpretations of British colonial rule but Western ones. These films, made with American audiences in mind, may reinforce the idea that what comes out of the West is still the best. When Attenborough's Gandhi was released in India in 1983, the attitude that Western filmmakers are far superior to Indians found expression in many newspapers and magazines. Victor Banerjee, who played the lead role in A Passage to India, was noted to have said that once he was contracted by David Lean to play that role invitations to all types of important cultural meetings started to arrive at his door. There are many in the former colonies who have an inferiority complex about their own culture and are awed by the "accomplishments" of the West—from designer jeans to movies to space shuttles. By subscribing to the ideology of world-class film, a nation's policymakers in effect choose to reinforce the servile mentality. Canada is no exception to this rule. Pierre Berton, the noted Canadian author and filmmaker, observed: I think that there is ... a real failure of nerve here, and it's the old Canadian failure of nerves, the feeling that unless we're like the Americans, unless we ape the American filmmakers, we ain't going to make it. And this runs through the whole cultural and financial scene. There hasn't been a major Canadian epic that I know of, based on a Canadian historical subject, or a Canadian contemporary subject, that's been a success that hasn't been made by an American, including the Gouzenko spy case, which was totally an American film.38

The present cultural policy in Canada does not appear to support what Berton and many others in Canada want, but rather it produces pictures such as Porky's. The servility reinforced by the ideology of world-class film found expression at the First Annual Academy of Canadian Cinema Awards, held in 1980. Having won the Best Actress Award for her role in Meatballs, Kate Lynch made the following observations on Canadian cinema's internationalization: I must also admit to feeling a bit awkward. Please understand, I'm very proud of my work in the film, but somehow the Royal Alex, $35 a seat, Mr. Ettrog's statuette, national television coverage—it's a tough act to really feel at home in all this for having played "Roxanne" in Meatballs, and I think that this award is as much a tribute to the fact of a Canadian actress in a leading role in a feature film as it is an award to me personally. And so I feel a bit awkward all alone in the spotlight and I'd like to share that, the spotlight and the awkwardness, with all the good Canadian actresses who did not land a leading role in a feature film.39

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While Kate Lynch specifically referred to the unequal distribution of jobs to Canadian workers under the tax shelter and drew enthusiastic applause from the audience at the award ceremony, Christopher Plummer, who has played leading roles in several Hollywood imitations, voiced support for the internationalization of Canadian film. He declared that Canadians should realize that landing a lead role in a Canadian film was just the "luck of the draw," and he went on to state, "[As] soon as we in Canada realize that we're all gypsies, nationality has absolutely nothing to do with it. ... And the sooner we can put ourselves in the same running as everybody else instead of the best Canadian, the best Samothracian—we're just the best actor, the best actress or the best nothing, or the best loser, it doesn't matter."40 These remarks clearly identify the branch plant mentality that pervades a section of the Canadian film industry. The historic, cultural, geographic, and other specificity that gives a people their identity is a problem for those who want to create audiences around the world with similar tastes and preferences. It is not without opposition, however, as pointed out by Norman Jewison, the noted Canadian filmmaker, who stated, "The important thing is that you have got to make films out of your own heart, out of your own mind, out of your own dreams. And we have got to get to the situation where we can supply our artists and our talented people with the way to do that and without them being sucked into New York, Paris, London, and Hollywood, where they'll give the money to make their own dreams."41 As a Canadian, who left the country twenty years ago for London and Hollywood when there were no opportunities to make films in Canada, and with more than twenty films to his credit, Jewison knows whereof he speaks. He has had to package someone else's dreams for a long time. The industrial model pursued by Canada's policymakers via the tax shelter whereby writers, producers, directors and other creative people train in the Hollywood style of production and aspire for the same symbols of success sets up a strong gravitational pull from the United States, the center of global commercial culture. Canada, in this mode of development, is not only a reservoir of films for the American markets but also a good source of trained talent. We will examine how the producers who packaged film projects with international mass audiences in mind fared in the marketplace and what benefits accrued to Canada, if any, from those films in the next chapter. 193

6.

Coproductions and Merchants of Culture Coproduction is part of the commercialization and standardization of a universal culture. I don't think it's brought anything culturally to Canada or Quebec. It's cinema as business. —-Jean-Pierre Lefebvre

Coproduction is the principal mechanism used by film and television producers to pool capital and labor from around the world and gain market access globally. Given the uncertainties of access to capital and markets compounded by the relatively small domestic market, Canadian producers looked outside the country to compete in the international financing game of feature film production. A few Canadian companies were successful in putting together multimillion-dollar feature film and television packages which were backed by private and public enterprises from several countries. Coproductions, according to these merchants of culture, are the only way to make "world-class" films acceptable to global audiences and survive as an industry. Canada's search for international audiences while having no control over the domestic market, was an inherently flawed policy which strengthened the power of the U.S. majors.

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Background A coproduction exists when any film (or television program) is produced by two or more production firms, but there are different permutations of the concept. Four categories of coproductions exist: 1. Public- and private-sector coproductions in a given country. The capital needed is raised from public as well as private enterprises. In Canada, The Wars and The Tin Flute were produced in this manner. However, the necessary talent may not come from the same country. 2. Public- and private-sector coproductions of different countries. An entrepreneur may put together public- and private-sector capital from different countries to produce a feature film. Gandhi, which cost approximately $22 million, was produced with one-third of its financing from the government of India (National Film Development Corporation) and the rest shared by two British private firms (Goldcrest Films and Indo-British Films) and an American private corporation (International Film Investors). The talent and crew included a number of international personalities. 3. Private capital from different countries. Venture capital from different countries is pooled by a company to make films for global markets. Cubby Broccoli's company, which has made several of the James Bond films, and Merchant Ivory Productions, known for such films as Room with a View (1986), are good examples. 4. Treaty coproductions. These are made under agreements between countries using some public funds (direct assistance and tax incentives). Several countries have laws controlling production, distribution, and exhibition of films. There may be laws that provide subsidies for domestic production and protectionist laws that dictate distributor and exhibitor quotas for domestically produced films. If coproducers plan to take advantage of aid schemes, as they typically do, a treaty must exist between the countries so that the coproductions will be legally accepted as domestic or "national" films in one or more countries. In Canada, films certified as official coproductions became eligible for financial assistance from the Canadian Film Development Corporation (CFDC) and also qualified for the tax shelter. Under Subsection 1104.2 of the Income Tax Regulations, a coproduction automatically qualified for the 100 percent capital cost allowance, whether or not it met all the criteria for certification.1 This made it attractive for foreign companies to collaborate with Canadian entrepreneurs to 195

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make feature films intended primarily for international markets. For instance, Bear Island, a 1979 coproduction between Canada and the United Kingdom, costing $13 million (Canadian) was supported by CFDC with 60 percent Canadian participation.2 Official coproductions were also considered Canadian for the purposes of the Canadian content regulations of the Canadian Radio-Television and Telecommunications Commission, which were established in the 1960s to ensure indigenous TV programming. It was an additional incentive given to national investors as revenues from the Canadian markets went to the Canadian investors. As public funds were invested, treaty coproductions were required to meet certain national expectations in Canada. They have historically been seen as tools to create employment in the country, provide opportunities for Canadian talent to work with more experienced foreign filmmakers, and thereby contribute to the development of a national film industry in Canada. A CFDC representative expressed such optimism as early as 1969: "These relationships will provide Canada's film-makers with increased financial returns, a much larger audience, and the opportunities to work with producers abroad who are more experienced in feature films."3 The interest and enthusiasm for coproduction treaties, which started in the early 1960s, came from both the public and the private sectors of Canada's film industry. Guy Roberge, then film commissioner of the National Film Board of Canada, apparently persuaded the directors of the board to endorse the idea that coproductions could help develop a feature film industry in Canada. Roberge apparently felt that if treaties were worked out between Canada, France, and the United Kingdom, they would help promote Canada as an equal among the film-producing nations, a status it had already attained in documentary production. He was supported by several Montrealbased film directors and N. A. Taylor in Toronto, who owned a theater chain at the time. We may recall that the idea for the Canadian Film Development Corporation was also floated at the NFB, which eventually led to the legislation being passed in 1966. The Cabinet approved the coproduction treaty concept before founding the CFDC. This joint effort between private and public interests in Canada resulted in the first coproduction treaty with France in 1963.4 Just as the Italian and French governments had encouraged national producers in the 1930s to pool resources in an attempt to overcome the domination of their film industries by the U.S. majors, the Canadian government appeared to expect similar results from the copro196

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duction treaties. But the absence of distributor and screen quotas allowing market access for films produced in Canada meant that market entry for the films remained limited. (We will return to that problem later.) Canada has more than twenty-five years of experience in treaty coproductions. The signing of the Canada-France coproduction treaty in 1963 paved the way for treaties with other countries: Italy (1970), United Kingdom (1975), West Germany (1978), Israel (1978), Spain (1973), Belgium (1984), Algeria (1984), Poland (1985), China (1986), and Czechslovakia (1986). Since the idea for coproductions originated at the National Film Board and as there were no other institutions related to the film industry, the responsibility to administer the treaties was in the hands of the board until 1972, when the Film Policy Section of the Department of the secretary of state took over. In May 1976, the government split the jurisdiction over coproductions by placing the operational responsibilities in the hands of the CFDC, and the policymaking power, negotiation and termination of treaties, and final approval of each production under the secretary of state. The CFDC's operational role included evaluating the coproduction projects to determine whether the applicant met all the requirements under the treaty. It had the power to issue "provisional approval" for projects after they completed principal photography, a mandatory requirement for a film to be eligible for the tax shelter. A mixed commission, including representatives of the government and the production industry of each country, was established under the agreement to review its workings and make recommendations for improvement. Excepting the United Kingdom, all other treaties signed by Canada allowed three- or four-way coproduction among signatory countries, thereby creating a bigger marketplace for capital, talent, and revenues. As of April 1987, Canada had treaties with twelve countries, and it continued to negotiate with many foreign governments for new treaties in an attempt to reach out into global markets.5

International Division of Labor Under the Canada-France treaty, the first feature film to be produced was Le coup de grace in 1964. It was shot in France, and all the key creative positions were held by French nationals. The Canadian producer had limited involvement in making the film. Moreover, the film 197

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was not widely distributed in Canada.6 This pattern of film production was not going to gain equal status for Canada and bring the intended benefits to Canadian filmmakers. Between 1963 and 1974, thirteen features were produced under treaty arrangements, of which eleven were made with France. Canada's financial participation in these films ranged from 20 percent to 80 percent.7 It provided 53 percent of the cost of twelve films, and four out of seven creative jobs (director, script, director of photography, editor) were held by Canadians. Only one film was shot entirely in Canada. All of the films were smallbudget productions, ranging from $125,000 to $900,000 (Canadian). Except for Claude Jutra's Kamouraska, the crop of films coproduced with France in the first decade of treaty coproductions is not noteworthy for any artistic accomplishments. Claude Heroux made four of the thirteen films, Pierre Lamy made two, and Denis Heroux produced two (one of them with John Kemeny).8 Most of these producers figured prominently in internationalizing the Canadian film industry in the late 1970s, as we shall soon see. The Spencer Report pointed out that not only were the budgets modest, but "the films were destined for sales in Canada and France primarily (i.e., no significant attempt was being made to choose subjects which would sell in the U.S.)."9 As we saw in Chapter 5, the policy of making films not intended for the American market was dramatically altered in the late 1970s with the introduction of the 100 percent tax shelter. Canada's experience with the U.K. treaty between 1975 and 1979 points out how the implementation of the treaty resulted in an unequal status for Canadian workers. During those years, thirteen features were coproduced with the United Kingdom. Canadian investors held a majority position in seven feature films, minority position in five features (33 percent to 45 percent), and equal partnership in one feature. The total budget of the films was $37,090,000 (Canadian), of which Canadian investors spent 54 percent.10 However, there was an unequal distribution of creative positions in these coproductions. Annex 8 of the U.K. treaty, in part, stated, "The performing, technical and craft contributions of the Canadian and British co-producers to a co-production film shall be in reasonable proportion to their financial participation."11 That intent did not translate into practice, as the facts show. Canada had contributed more than half of the budgets but did not get a proportionate share of creative positions for Canadian workers. Although five coproductions with the United Kingdom were shot en198

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tirely in Canada, bringing opportunities to studios, laboratories, and other technicians, all the music was recorded in Britain.12 On May 5, 1978, the first mixed commission under the treaty met in London to review the nine coproductions approved to date. The Canadian delegation made it clear that it expected improvement in the allocation of creative positions in the future, but the U.K. delegation felt satisfied with what had been accomplished.13 One recent study found that Canadians fared better than recorded by the Spencer Report (see Table 15). Of the 13 features produced in this period with the United Kingdom, 6 out of 13 directors were Canadians; of the 18 script writers, 5 were Canadian; of the 13 directors of photography, 4 were Canadian; of the 13 editors, 5 were Canadian; of the 13 composers, 5 were Canadian; and of the 118 principal actors, 37 were Canadian. Only in art direction did Canadians hold a majority position (9 out of 16).14 The slightly improved picture in the allocation of jobs to Canadians may be a factor of including landed immigrants or expatriates as Canadian nationals. The general optimism expressed in 1970 by the CFDC had, by 1976, turned to caution. It called for strict control over coproductions: At year's end, the Corporation, anxious to underline its prime purpose of fostering Canadian feature film industry, decided it would invest in co-productions only when either the main performer, the director or the writer were actively involved in the Canadian film industry. . . . In principle, the CFDC believes that under strict control, co-productions can make a significant contribution to the Canadian film industry.15 A study by the Council of Canadian Filmmakers found that the CFDC met the criteria in the six coproductions in which it had financial participation.16 Films produced under the U.K. treaty included Power Play, Ragtime Summer, Full Circle, and The Uncanny. CFDC invested in only one Canada-France coproduction in this period, Rimbaud est mort. It was the only French coproduction to have a Canadian director out of the ten features that were certified as official coproductions under the treaties in 1976.17 The CCFM study attributed the results to CFDC's tough investment policy under Michael Spencer, its executive director. When compared to the policies pursued by Michael McCabe's regime between 1978 and 1980, it was indeed tough. Coproductions without CFDC assistance might tell another story, but statistics for those films were not available. The storm kicked up by the introduction of the 100 percent tax shelter in 1976 aggravated the issue of imbalance in jobs allocated to Canada by treaty films. As we 199

Table 15 Impact of Coproductions on Canadian Film Industry Workers in Key Creative Positions, 1964-1983 Scriptwriters

Directors of Photography

Art Directors

Films

Directors

France (1964- 1979) France (1980- 1985) Italy (1970- 1979) U.K. (1975-1979)

28 16 4 13

28(7) 16(5) 4(1) 13(6)

41(15) 29(16) 4 (3) 18 (5)

27(13) 16 (8) — 13 (4)

27(16) 16(12) — 16 (9)

28(12) 16(11) 4 (1) 13 (5)

34 (8) 831 (75) 368 (144) 16(10) 168 (86) 277 (148) 4 (1) 33 (7) 49 (13) 13 (5) 118 (37) 204 (71)

TOTAL

55

55(17) 31

82 (32) 39

51 (24) 47

54 (28) 52

55 (25) 45

59(18) 440(179) 768 (323) 41 31 42

Percentage of jobs held by Canadians

Editors

Source: Telefilm Canada, From Nation to Nation: A Look at Coproductions with Canada, March 1986. Note: Numbers in parentheses in each category are jobs held by Canadians.

Composers

Actors

TOTALS

Percentage of total jobs

39 53 27 35

Coproductions and Merchants of Culture

shall see, it would further internationalize the Canadian film industry and render it an appendage to the U.S. motion picture industry. Table 15 provides a comprehensive picture of the division of labor in the years from 1964 to 1983 between Canada and the principal coproduction treaty countries: France, the United Kingdom, and Italy. The data were not available for other treaty countries. The data in the table suggest some overall patterns of distribution of jobs between Canada and other countries in the seven key creative categories: director, script writer, director of photography, art director, editor, composer, and cast. A total of fifty-five films were produced in the nineteen-year period under the treaties with France, Italy, and the United Kingdom. Only four features were made under the West German treaty signed in 1978. One of them, Girls (1979), was a coproduction with France. Three features were produced with Israel which are not included in the table. The budgets for the twenty-eight films with France between 1964 and 1979 totaled $41,118,000 (Canadian), of which Canada contributed 48 percent.18 Except in the art director category, in which the Canadians got a majority of the jobs, the overall balance was negative to Canada, as it shared only 39 percent of the total key creative jobs. Canadians lost such important creative positions as director, script writer, director of photography, and editor. One might argue that Canada did not have trained talent, which resulted in the French workers doing better. There appears to be some merit to that argument as Canadians did make some gains in the 1980 to 1985 period in all categories except direction. Some Canadian directors and directors of photography were well known by then, particularly in Quebec. While major Quebec directors suffered unemployment in the 1970s and turned to television for employment, coproduction treaties did not provide any opportunities for them. The cast category should be scrutinized carefully. As expatriate Canadians were brought to Canada to make the films because of their visibility in international markets, coproduction treaties may not have met the objectives of creating jobs for Canadian actors. It was tagged opportunistic immigration by the press and was widely practiced by producers who desired to reach worldwide audiences. The Association of Canadian Cinema, Television and Radio Artists and other craft unions lobbied the government to correct this abuse and the resulting imbalance in the use of Canadian talent. In the 1980 to 1985 period, Canadians participated in sixteen feature 201

Canadian Dreams and American Control

films with France. Their budgets totaled $78,734,468 (Canadian), of which Canadians provided 54 percent.19 Canada was a majority partner in six features and an equal partner in one. Although Canada had made some overall gains in jobs when compared with the previous period, from 39 percent in the seven key creative categories to 53 percent, the gains did not correspond to the increase in investment. For considerably fewer films, Canada's investors more than doubled their share of investment, from approximately $19.7 million between 1964 and 1979 to approximately $42.66 million. With the U.K. treaty, Canada's experience in creating employment for nationals was worse than it was with France. Of the thirteen feature films produced between 1975 and 1979, Canadian investors contributed 54 percent of approximately $37 million (Canadian).20 They held a majority position in seven features and equal partnership in one. Canada shared only 35 percent of all jobs created in the seven key categories. In the cast category, Canadians fared poorly overall and worse if we consider the fact that some of them were expatriates or landed immigrants. There were no treaty coproductions between the two countries in the years 1980 to 1986.21 Canada's investors contributed 25 percent of $5.18 million (Canadian) spent on four Italian coproductions between 1970 and 1979. Canadians held thirteen of the possible forty-nine key positions, or 27 percent of the possible key creative jobs. The coproduction policy objective of attaining parity or balance in sharing key creative jobs with treaty countries was clearly not achieved. Despite the nurturing effect the treaty coproductions may have had on creative personnel in those years, Canadians were systematically left behind.

Pursuit of International Finance and Markets The Canadian government policy of building a capitalist film industry through tax shelters ran into a serious problem by 1981, as we witnessed in Chapter 5. The general recession in the economy, coupled with the high degree of uncertainty surrounding profits from film investment, and the well-publicized abuses of the Capital Cost Allowance program further discouraged investors in Canada. When the government restructured the 100 percent CCA favoring Canadian workers by a modified point system in June 1981, the tax-shelter funds 202

Coproductions and Merchants of Culture

had dried up. The CFDC summed up the depression in the film industry in its 1982-83 annual report: After the hopes of past few years and the overheated production, it was becoming abundantly clear that private sector financing for films was drying up. The cause was twofold: the general slow down in the economy, and the disenchantment of investors with a good many past film investments. The tax deferral incentive of the Capital Cost Allowance was not enough; investors wanted to see a return on their investments.22

The net result was that Canada's producers would orient their film and television productions toward U.S. markets and seek new ways of maximizing revenues from that market. Partnership with international capital would become the mainstay of financing in the 1980s. The entire entertainment industry in the United States was going through changes. Brought on by a combination of new delivery systems such as cable, pay television, and videocassette players and the Reagan administration policy of "less government," the demand for film and television programming in the United States grew considerably. New opportunities awaited film and television program suppliers. But lacking control over their own theatrical distribution and with no ensured access to the American market, Canadian film producers were at great risk. After all, the theatrical motion picture industry remained at the core of the multi-billion-dollar entertainment business in the U.S.-Canada market. Andre Lamy, who succeeded Michael McCabe as the executive director of the CFDC, commented on the adverse conditions faced by Canadian producers in the changing conditions of the film industry: "It was no easy task for the Canadian producer to grab hold of the distribution industry—only the Americans control their own distribution. For the Canadian producer or director, it was a hell of a game to make sure that there would be some money back from theatrical release."23 Some Canadian producers indeed played what Lamy called a "hell of a game" to secure a place for themselves in the international (American) film industry, and their frustrating experience reveals the inherent problems in producing for international audiences. Table 16 presents a summary of the various sources of revenue for ten Canadian films which were produced with the intention of profiting from international markets and the structure of the distribution deals worked out by the producers with the American majors. The figures in this table should be read as the nearest approximations. The audited financial statements of each film may produce slightly different figures. 203

Table 16 Sources of Revenue and Structure of Distribution Deals for Selected Canadian Feature Films Title/Yr/ Negative cost (Can. $ millions)

U.S.

Canada

International Type of Deal

Network/Pay TV U.S./Can. U.S. box office Rental U.S. ($ Millions) ($ Millions) ($ Millions) Can.

Atlantic City/

Paramount

Paramount

Various

10/252,000

5

Paramount

Paramount

Various

13-14

2.7

Columbia

Columbia

Various

18/49,270

5

Meatballs/ 197 8/ 1.6

Paramount

Paramount

Paramount

Scannm/1980/

New World New World Mutual

Distributor

1979/6 My Bloody Valentine/

1980/2.2 Happy Birthday

to Me/1980/4

4

Various

Gross deal (no advance) Gross deal ($350,000 guarantee) Profit deal ($4 million plus advance)

Gross deal (3.3 55 million advance; Canada: $350,000 nonrefundable guarantee) Profit deal (ad- 18 vance$1.2 million); Crosscollateralized rentals

21.2

6

1.5/3.5

$350,000 none

No network sale

$1,500,000 (Pay TV) plus cassettes not known

No U.S. network sale

$300,000 (CTV) $300,000 (HBO)

Remarks 50—60 prints; areaby-area break. 1,000 prints; $4 million ad budget; still unrecouped. International sale $2 million plus; investors recouped. $5 million returned to producer from rental.

Not yet sold to Radio Canada; launch costs $10 million; 300-400 prints; not national break.

Table 16 Sources of Revenue and Structure of Distribution Deals for Selected Canadian Feature Films Continued Title/Yr/ Negative cost (Can. $ millions) Terror Train! 1979/2.7

U.S.

Canada

International Type of Deal

Network/Pay TV U.S./Can. U.S. box office Rental U.S. ($ Millions) ($ Millions) ($ Millions) Can.

Fox

Astral Films

Various

Gross Deal (not collateralized)

6-7

3.5

PanCanadian

Various

Profit deal (advance; minimum crosscollateralization) Gross deal (advance; minimum crosscollateralization) Gross Deal (advance)

13.5

5.3 (U.S.) 1.4 (Can.)

—

4 (U.S.) .6 (Can.)

25-30

10.33(US)

Distributor

The Changeling/ AFD 1980/7.6

Tribute/19SQ/ 8.4

Fox

PanCanadian

Fox

Heavy Metal/ 19801 $6

Columbia

Columbia

Columbia

Remarks

No U.S. network sale

$1 5,000 (CTV) 1,000 prints; na$ 1 ,000,000 tional launch; $5 (HBO) million ad budget. $2,500,000 (NBC) No pay TV $300,000 (CTV) sale in Can$550,000 (HBO) ada yet.

$3,600,000 (all sources)

not known

Good launch; problems with critics; advertising problems.

Canadian Dreams and American Control

As the source recounted the statistics without examining the account books, the figures may differ from the actual ones. What is important for our analysis, however, is that these data reveal the patterns of terms and conditions worked out by the producers with the U.S. distributors. Consequently, they are useful guides in understanding the actual policies and their practices in the U.S. motion picture industry and their implications for Canada. Three films—Happy Birthday to Me, Scanners, and The Changeling— were sold to U.S. distributors on the basis of a profit deal. It is also called the net distribution deal and is the basic method used by the distributors to acquire independently produced films for distribution in the United States and other markets. The distributor agrees to pay the negative cost of the film and structures the deal in such a way that all the launch costs and the distributor's commission are deducted from the rental revenues. Independent producers claim that they seldom see any profits from this type of deal. The Canadian films were produced by John Dunning, Claude Heroux, and Garth Drabinsky, respectively. In each film's case, the distributor advanced substantial sums of money to the producer for the delivery of the film, and in each case gross rental revenues were cross-collateralized. This meant that losses in the theatrical markets were made up by sale of rights in the ancillary markets. While the distributor's risk was minimized by cross-collateralization, the producer recouped less from the gross rentals. This is clearly evident in the case of The Changeling and Scanners, which had U.S. rentals of $5.3 million and $6 million, respectively. However, as the producers had to wait until the distributor recouped various costs associated with launching the film and the commission, the share for the producers was considerably low.24 New World, the distributor, spent $ 10 million launching Scanners. It had paid an advance of $1.2 million, and the financiers were forced to wait a long time to recoup their $4 million investment. Although its total box office was $18 million, because of cross-collateralization the producer received a total of $2.9 million from the distributor. New World exploited the picture with approximately 300 prints on a territory-byterritory release pattern. According to the producer, the film would have generated higher rentals if it had been released nationally with 1,000 prints or more and a bigger advertising campaign. Distributors seldom take such high risks on independently produced films and reserve such marketing to their own big-budget films. According to Garth Drabinsky, coproducer of The Changeling, he secured a good deal for the film with minimum cross-collateralization 206

Coproductions and Merchants of Culture

Scanners, written and directed by David Cronenberg, produced by Claude Heroux, with Stephen Lack (left) and Robert Silverman. and an advance. However, American Film Distributors, a minor company, had financial difficulties at the time and could not hold the dates they had obtained from the theaters in many cities. The distributor eventually went out of business, thereby affecting the film's grossing potential. The film sold well in international markets. Drabinsky explained why the revenues from those markets were not particularly strong: "[The] trouble, when you are dealing with a foreign territory, [is that] you always have to concern yourself with the solvency of the various territory distributors. And in several instances, they went bankrupt along the way and we had to reassign the rights to a new territory distributor."25 The profit deal made for Happy Birthday to Me with Columbia Pictures was an exception. Since it was budgeted for $4 million and the producer obtained more than that amount in the form of an advance from Columbia, investors recouped their monies before the film was released. The international theatrical sales brought more than $2 million to the producers. Happy Birthday to Me and Scanners were not sold to a U.S. television network, probably because they were considered too violent by network censors. John Dunning, the coproducer of 207

Canadian Dreams and American Control

Happy Birthday to Me, stated that overall it was a good distribution deal: "We had a fee, not as much as we'd have liked, because we had to put in some for the music. But our investors saw their dollars back. The studio got a good film and made money. It's a nice deal if everybody makes a bit."26 Some Canadian producers insisted on a "best efforts" clause in the distribution contract in order to obtain more aggressive marketing for their pictures in the United States. The concept was suspect because demonstrating what comprised best efforts by the two parties in marketing a film was next to impossible. Garth Drabinsky stated emphatically that a best efforts clause was absurd from the viewpoint of producers for the following reasons: You spend millions of dollars in creating a valuable asset, then to hand that asset over with no consideration other than their best efforts and their commitment to spend a certain amount of money down the road, and they open on a selected basis in a regional market, for example, and the picture doesn't perform, they walk away from their obligation and say, "Sue me for damages." It will be cheaper for them to defend their action than to meet their commitment. Now you've tied up your product in litigation; nobody else will touch the picture, and there's no future for it. So you've got to be nuts to give away a picture without consideration up front.27

It appeared from the interviews that Canadian producers, when offered only a profit deal, tried their best to obtain an advance to cover as much of the negative cost as possible. In this process, they were denied the profit from the exploitation of the picture. John Dunning explained: Most people are working in this for a fee. If you have a producer's fee built in, the American studios accept a reasonable producer's fee, about $200,000. So you're not starving, but what's denied you is the profit motive. Andre Link [his partner] and I have always liked the carrot, and the carrot in this business is like a race horse. You want to get the winner. It's not the fee, because we've lost our fee money many times, either to completion of the film or because we've put it back into the workings to get a new soundtrack or something. We're suckers that way, because if it's either plug it big or starve, we'll pledge our fee. We like the idea of action and of the profit motive.28

Six of the ten films in Table 16 were sold by their producers to U.S. distributors on the basis of a gross deal. This has three important characteristics that make it attractive to producers: (1) advance, (2) 208

Coproductions and Merchants of Culture

participation from the first dollar, and (3) distributor paying the launch costs. This type of deal is most desirable to independent producers, as their negative cost could be covered by an advance or a nonrefundable guarantee. The producer is in a profit position even before the picture is released. While it is attractive to independent producers, it is not easy to obtain, as illustrated by the following two examples. Cinepix of Montreal produced Meatballs for $1.6 million. Paramount Pictures acquired the film on a gross deal basis, paying an advance of more than $3.3 million for the U.S. theatrical rights, and also bought the Canadian theatrical rights separately with a nonrefundable guarantee of $300,000. Paramount had correctly assessed the enormous boxoffice potential of the low-budget comedy and thereby secured foreign theatrical rights for it. The producers were in a profit position even before the film's release. Of the $21.2 million in theatrical rental generated by the film, which made it a sleeper by industry standards, the producers received an additional sum of $5 million. Paramount also made a small commission on the sale of ancillary rights to the film. John Dunning called it "a sweetheart deal," because it was so profitable to all parties concerned. Atlantic City, produced at a cost of $6 million, was sold on the basis of a gross deal but failed to get an advance from Paramount Pictures. The producer argued that getting an advance often raised the distributor's commission on ancillary market sales anywhere from 15 to 30 percent. In the case of this film, Paramount made a 10 percent commission on the sale of ancillary rights. Although Atlantic City had many saleable ingredients, coproducer Denis Heroux found it hard to sell to the majors. It was directed by Louis Malle, who has an international reputation, and it featured Burt Lancaster, an American star. It had also won an award at the Venice International Film Festival in 1980. While these attributes helped the producer in selling the film, especially in foreign territories, the sale to Paramount was tough to make. The film had yet to recoup $4 million of investors' money, 20 percent of which came from France, with the balance from public units sold to Canadians under the tax-shelter scheme.29 Atlantic City grossed $10 million in the U.S. theatrical market and was sold to CBS-TV for $1.5 million and to Home Box Office (payTV) for $3.5 million. Although Paramount made fifty to sixty prints of the film and released it area by area, it did not know how to market the film. In an analysis conducted elsewhere on the film's release pattern and box-office performance in the Chicago market, this argument is substantiated.30 Heroux agreed that Paramount had 209

Canadian Dreams and American Control

difficulty marketing the film in the United States, as they could not categorize it as neatly as they could a crime drama or an adventure. He added, "The problem with us is that that's the kind of movie we want to do—movies that are different and original that don't enter a category. So, we have to suffer for it."31 On the question concerning an advance and other favorable terms in a gross deal, it depended on the reputation of the independent. Garth Drabinsky explained it in the following blunt terms: "Well, if you produce a dog, all the clout in the world isn't going to determine your contract. You produce a picture they want a lot, then demand creates position to be able to negotiate."32 The key was to produce a picture "they want a lot." It's clear that even when Canadian producers make pictures that may fit the American mass-market needs, as Drabinsky, Dunning, and Greenberg have done, whether or not they receive a gross deal depends entirely on the majors' priorities at the time. Dunning's Meatballs sale to Paramount attests to this fact: They [Paramount] wanted a summer film and wanted this film very badly. They said, "OK, we'll give you a deal." We're on a sliding scale. The advance was deducted from what we're going to earn. Then we're at 12V2 percent and we went up in percentage as they recouped more and more of the money. So, we started at 12 percent recoup at $12 million, it went to 22 percent, then to 27 percent, and finally way up there to 40 to 50 percent. They absorbed their own distribution expenses in their part. We started to see dollars and recouped close to $5 million on the film.33

Even when a producer receives a gross deal with an advance, if revenues are cross-collateralized by a major across territories in the theatrical markets or across theatrical and ancillary markets, the producer will lose out to the distributor. Denis Heroux's mass-marketed film Quest for Fire (1980), distributed by Twentieth Century—Fox, had a gross deal with an advance of $3 million. Its launch costs were $12 million. The film's gross box-office revenues from the U.S. market were $20 million and from the Canadian market were $6 million.34 As these revenues were not split between producer and distributor, because of cross-collateralization, the producer received less revenue from the rentals. It is only when a film is produced for less than $2 million and earns a box-office gross of $55 million, as Meatballs did, that having a gross deal not only protects the producer's investment but also ensures a good share of the profits. Such instances of success are extremely rare in the industry. 210

Coproductions and Merchants of Culture

Coventures To overcome these types of problems, producers employed the presale or coventure method of financing pictures. Coventures are international coproductions not covered by an existing coproduction treaty or with producers in countries where no treaties exist. As the U.S. government does not have coproduction treaties, equity partnerships with American companies are usually called coventures. The objective, as in coproduction, is to gain market access as well as minimize risk for all investors involved. Harold Greenberg's hit feature Porky's (1982), budgeted at $6 million, is an example of how equity participation was used by Canadian producers to minimize risk. It was financed by Mel Simon Productions (an American company), Astral Films (Greenberg's Canadian-owned firm), and Twentieth CenturyFox. The picture was distributed by Fox without cross-collateralization of revenues across various territories. Greenberg stated that the coventure method allowed him to minimize financial participation from Fox. He explained the reasons for such a policy this way: With the majors, the more money you ask them for the more rights they take. As equity participants, when we minimized the investment of the U.S. majors, we were able to construct a deal which didn't tie up the ancillary rights. Again it goes down to the point that the majors, when they get involved with a film, they look at their expenditures and what is their down-side protection. The lower the risk factor, the more you can negotiate on the up side.35 Despite such useful tactics to profit from international distribution of films, the fact remained that Candians had to produce films such as Porky's which fit the mass-marketing objectives of the American majors. Denis Heroux and Johnny Kemeny produced three feature films— Louisiana, Le crime d'Ovide Plouffe, and Le sand des autres—and a sixhour television miniseries, all of which had a combined budget of approximately $46 million. These were joint ventures with European, American, and Canadian television companies, coupled with theatrical rights presale wherever possible. One important omission in this package was the U.S. theatrical market sale. Heroux claimed that one-third of the budget came from French television, another third from HBO in the United States, and the other third from Canadian pay television, broadcast television, and theatrical rights combined. He also generated a fourth third, as he called it, from a sales agent who presold the package at different film and television festivals around the world.

211

Canadian Dreams and American Control

Heroux claimed that he did not target the U.S. market because his films were not typically mass-market-oriented as Greenberg's films were: I think we can only survive through the other ancillary rights—pay TV, conventional TV, and syndication. Forget the U.S. [theatrical] as a main market. For us, the main marketing comes from Europe. We finance our films with 50 percent European, 25 percent Canadian, and 25 percent American capital. So then if it works in the U.S. theatrical market, it's extra icing on the cake. We don't target the U.S. Well, I'm not saying everybody must do that, that's their problem. But that's not what we're doing.36 One of the producers, John Dunning, was able to sell an idea to a major to finance a small-budget science-fiction film. He discovered how his modest film concept became an industrial monstrosity given the dynamics of Hollywood studio production. Dunning's insights gained from the production of Space Hunter (1983) for Columbia Pictures are worth quoting in full: Ivan Reitman had a big development deal with Columbia. We showed him this Road Warrior, sci-fi type of thing we wanted to do for $4 million. A nice little low-budget film. I had a Canadian director and everything was set. Ivan liked it and said, "I'll get you a distribution deal." . . . So he takes it to Columbia and it starts. "You have to fix this, you have to fix that." So, we fix this and that. "You have to take it off the world, it's too depressing. Take it to another planet." The costs are starting to run, but they say, "OK. We're going to do it. Get a budget." So by this time, the budget had gone from four to six million. Now we have to create a whole new planet. They say, "OK, we'll do it in 3-D," because the big 3-D market was coming in. They said, "Everybody is doing a 3-D and Columbia doesn't have one." They felt they could beat everyone else out, including Jaws 3-D, by getting it out quickly. We're known for doing films quickly. We're not too happy about 3-D, because it's scary. I'd never seen 3-D that worked really well. Then another million and a half is added to the budget, because it's double camera, you can't shoot as fast, etc. Suddenly we're at 7.5 million, and it keeps going, and then we'd like to reshoot. In the decision making, we lost, because the studio took it over. The completion guarantor was in only one day, because he took one look at the mess and ran, and Columbia took over the whole thing. We just sort of stood by and watched this film take off. . . . It's a typical evolution of the Hollywood-style film, and this was our only experience with a Hollywood-style film, one shot and controlled by the studio. . . . Our Canadian director just went under, around the 3-D part. It just became too much for him. 37 212

Coproductions and Merchants of Culture

The film was finally directed by an American, Lament Johnson. While Dunning's experience with Hollywood-style filmmaking came close to being a nightmare, Space Hunter, as a profit-making venture, was dubious at best. Dunning remarked, "We probably see less out of a $12 million film than we see out of David Cronenberg's early stuff, even with the ancillary rights."

Priming the Pump The trend to denationalize Canadian cinema by producing pseudoAmerican films continued into the mid-1980s. Some Quebec directors, however, made films that were true to their backgrounds and spirit. UAffaire Coffin by Jean Claude Labrecque, Les bons Debarras by Francis Mankiewicz, Fantastica by Gilles Carle, Cordelia by Jean Beaudin, and Uhomme a tout faire by Micheline Lanctot were films that represented Canadian cinema at Cannes and other film festivals. The debate in the film industry regarding an indigenous cinema versus a capitalist film production sector raged. Economic entanglement with the American film industry by Canadian producers looking for markets was seen by many as a process that would perpetuate Canada's cultural dependency on the United States rather than help build a national cinema. Maurice Leblanc, president of Quebec's Syndicat National du Cinema, summed up the feeling of national expropriation that many unions felt about the international orientation of the Canadian film industry: "Coproductions are nothing but shit. All the energy we've wasted, all the money we've spent, it's always been on Coproductions. It's always there that we've had problems: lower salaries for instance. It's like Mexico or Spain used to be: they come over here to film the natives."38 Francis Fox, Canada's minister of communications at the time, pointed to the international pressures on the creative people: "When Canadian producers and other key creators in film feel constrained to mold their productions into U.S. facsimiles because they are given to believe that unless they do this, the majors will not consider distributing them in Canada or anywhere else. This is appalling."39 The leading producers in Canada's emerging capitalist cinema willingly participated in the process of molding their productions to fit American market needs in order to maximize profits. They had no trouble in internalizing what was considered acceptable in the mainstream cinema of Hollywood. 213

Canadian Dreams and American Control

Those were simply the rules of the game of survival that the merchants of culture had to play. The cultural policies announced in 1983-84 by Francis Fox changed nothing and in fact may have aided in further internationalizing Canadian film and television. Given the overwhelming presence of American imports on English-language television in Canada, Fox instituted a Canadian Broadcast Program Development Fund in 1984 with $35 million, to go up to $60 million by 1989.40 The CFDC, renamed Telefilm Canada, was entrusted with the responsibility to administer the fund. It was expected that this initiative would help inject an additional $750 million in public and private money into the production of Canadian programming. In the federal budget of February 1986, the government announced the creation of a $33 million Feature Film Fund to be administered by Telefilm Canada.41 These policies were historically consistent with the Canadian government's laissez-faire approach to developing a film industry. They were announced after the government's failed attempt to use voluntary quotas to gain access to Canada's theatrical screens. These initiatives also reflected the fact that Canadian television, despite the twenty-year history of Canadian content regulations, was dominated by American imports. While enlarged federal subsidies for film and television production offered greater opportunity for Canadian capitalists to invest in production, the government's policy toward coventures, among other economic factors, led to a massive influx of American production companies into Canada. Coventures qualified as Canadian content programming even when some of the producer functions were performed by non-Canadians, as long as the Canadian production company had no less than an equal decision-making responsibility for all creative elements of the production.42 Foreign corporations had to apply through partnerships with Canadian-owned companies to qualify for Telefilm Canada subsidies. It required that the Canadian copyright be held by Canadians. Although these productions were required to meet the eligibility criteria set out for the CCA, the coventure policy appeared more flexible. The response from Canadian and American firms to the coventure policy was overwhelmingly positive. Numerous coventures were signed between Canadian producers and American film and television companies. In 1985-86, Telefilm Canada entered into fifteen coventures with American companies, including the Public Broadcasting System, Viacom, Columbia Broadcasting System, Disney Channel, and New 214

Coproductions and Merchants of Culture

Century. The total budgets of these productions were an estimated $43.9 million, of which Telefilm Canada contributed $16.1 million.43 These productions included Anne of Green Gables with PBS and Night Heat with CBS. Fifteen other coventures were produced with companies from the United Kingdom, Germany, France, and other European countries.44 By 1987, American production in Canada had reached an estimated 50 percent of the total volume of film and television producdon.45 There were several advantages to U.S. producers in traveling north, in addition to the indirect subsidies offered through Canadian partners. While the average cost of a television or feature film production soared in the United States by an estimated 33 percent, advertising revenues fell at the three dominant television networks. The new owners of the networks were more cost-conscious. All of this meant that American producers were willing to run away to more cost-efficient centers of production. Crossing the border into Canada meant a savings of 40 percent or more because of the favorable exchange rate. Besides, labor costs were considerably lower in Canada compared to the United States. A seventy-member crew was reported to cost $23,000 a day in Toronto, compared with $75,000 in Los Angeles and $135,000 in New York.46 Some Canadian labor unions were willing to give concessions to American producers simply to keep their members employed. It was noted by the news media that union locals gave up overtime pay when locations were available only on weekends. There were cost differences in set construction as well. For Burnin' Love, a movie about witch trials, old Salem in Massachusetts was built in Ontario for $45,000, whereas it would have cost $1.5 million in Hollywood.47 On the whole, savings in production costs and the devalued Canadian dollar, coupled with attractive subsidies for Canadian partners, catapulted Toronto, Vancouver, and Montreal into positions as major centers of film and television production for the American market. Between 1981 and 1985, Walt Disney Productions spent close to $26 million (U.S.) in Canada to produce three theatrical features, two TV-movies, and several programs for the Disney Channel.48 Such branch plant production was so significant that Canada came to be known as the Great Technicolor North. While the many advantages for American companies in Canada resulted in frenzied production activity and jobs for Canadian technicians, it was not without its perils. Canadian production companies became increasingly dependent on the federal subsidy schemes and foreign revenue sources. For example, one of the leading Canadian 215

Canadian Dreams and American Control

companies enjoying the coventure policy to produce film and television material for the U.S. market was Atlantis Films Limited. In 1987, it was reported that 80 percent of the company's revenues came from outside the country—roughly 55 percent from the United States and 25 percent from Europe.49 Its productions included Airwolf, Night Heat, and Hot Shots, all produced relatively cheaply to fill the late-night television schedule in the United States. If any one of the variables that made Canada attractive for foreign producers disappeared, Atlantis, and others in the same dependent position, would be in serious trouble. Screenwriter Joe Wiesenfeld (Anne of Green Gables) made the following observation on Canada becoming a supplier of low-cost entertainment for the U.S. markets: There's tremendous pressure from the Americans right now for the Canadian industry to adopt itself to that; it's where all the short term profits are. So a company like Atlantis, which is identified with the aspirations of the Canadian television business as a cultural enterprise, suddenly becomes the producer of record on a series like Airwolf. It's quick and profitable. But the trouble is, there is so much of this stuff that it's beginning to take up all the creative production capacity of the Canadian industry.50

Preoccupation with the production of U.S. television series meant, at least in the case of Atlantis, fewer film and television projects that had their origin in Canada. Of the seventeen television series coproduced with American companies in 1986-87, Atlantis produced three.51 It only coproduced one Canadian feature film, Cowboys Don't Cry, directed by a Canadian—Anne Wheeler—and filmed in Alberta. Atlantis partner Seaton McLean responded to the accusation that his company "sold out" to the American film industry by saying, "We're Canadian producers and we're going to work throughout the world on different productions. They may be stories that take place in Thailand or France or Algeria, but they'll be Canadian by virtue of the fact we produced it. The notion that you can only make things that are mirror-like, reflecting your own culture, is myopic."52 McLean was ignoring the fact that the primary audiences are not Canadian but American for these "Canadian" films and television programs. His argument appeared to be that if Canadians could make Chrysler cars for Canadians and others, the same logic could be applied to producing films and television programs for distribution by American corporations in various countries. That is the basic law of international production. However, it is problematic when applied to films and tele216

Coproductions and Merchants of Culture

vision programs because Canadian audiences have, time and again, expressed the desire to see Canadian stories, actors and actresses, humor, locations, and history represented on their theater and television screens. Given the demands of the international (U.S.) distributors on the Canadian production industry these days, such aspirations can hardly be met. Moreover, the many Canadian writers, directors, and other talent who would like to participate in domestic films for Canadian audiences would be squeezed out. The process of denationalizing Canadian feature films started with the introduction of the CCA, whereby Canadian locations and talent were offered to meet the exigencies of the U.S. market and reached a new high. In the CBS miniseries I'll Take Manhattan, ABC's Amerika, or Steven Martin's comedy feature Roxanne, Canadian locations masqueraded as American locales. Toronto's Jarvis Street was so clean for CBS's Night Heat television series that the crew scattered trash to simulate the look of New York City. Some of the proponents of the federal cultural policy which encouraged Canada to become a supplier of low-cost entertainment to the United States believed that this was a window of opportunity. They pointed out that a number of production companies were acquiring a capital base which, in their view, would help build an industry in Canada. But they did not seem to understand that it was subject to the priorities and needs of the American corporations. Table 17 provides an estimate of the number of feature films launched worldwide by American companies in the years 1981 to 1983. While the table shows that the majors were shooting fewer films in the United States, they increased domestic production by 54 percent between 1982 and 1983. They also doubled their offshore production from 1981 to 1983. We have examined the various reasons for the offshore production in Canada. Even if Canada received a small share of the branch plant films, in the long run it is hard to determine whether the majors would continue their investment policy. The historical experience of the British film industry53 and Canada's own "quota quickies" history54 attest to the fact that such offshore production by American majors cannot be taken as a permanent phenomenon. One could speculate that if Australia or some other country offered better terms to foreign producers, then the majors would not hesitate in moving production there. As the leading multinational corporations involved in film production and distribution, they would make their financial, marketing, production, and other decisions based on their activities not in one country alone, even when that country is home base. It is the basic law 217

Table 17 Estimated Number of Feature Films Launched by American Companies Worldwide, 1981-1983 1981a

Offshore

Domestic

Offshore

Domestic

Offshore

81 41

18 56

37 17

28 46

57 41

35 38

122

74

54

74

98

73

Domestic Majors Independents TOTAL

1983

1982

Source: For 1981, Variety, December 8, 1982, pp. 1, 115; for 1982 and 1983, Variety, October 5, 1983, pp. 1, 34. Data for these years are for January through September of the year. a

!981 data are for eleven months of the year only.

Note: Films completed in each year may be fewer than the actual number of films that went into production.

Coproductions and Merchants of Culture

governing multinational investment behavior. The argument that coventures with American and European firms would help build an industrial infrastructure in Canada is opportunistic at best. Putting the whole development policy at the feet of the multinationals effectively reduced any independent course Canada could have taken in building a national film industry. A more complex and revealing picture of the majors' policies related to production and acquisition abroad is provided in Table 18. It presents data regarding the American majors' releases and compares them with in-house versus outside acquisitions for the years 1980 to 1986. While the total number of in-house films released by the eight American majors for these years declined from seventy-five in 1980 to fiftynine in 1986, their releases of pickups from around the world grew dramatically initially but were on the decline. The ratio of in-house features to total releases declined between 1980 and 1983 and rose in the following years. This acquisition policy of features produced abroad by the majors may have favorably affected Canadians. Canadians not only have to make motion pictures acceptable to the majors, but have to assume that the majors would continue their policy of acquiring a high ratio of releases from outside the United States. If the majors' in-house releases keep declining as they did in the years 1980 to 1983 from 64 percent to 36 percent, Canadian producers potentially could sell their films and television programs in the U.S. market. Between 1983 and 1986, however, the in-house films released increased by 20 percent. If this became the trend, it would jeopardize those Canadian film producers who need to have access to the U.S. theatrical markets to remain profitable. It would be particularly difficult for producers who make massmarket-oriented pictures, such as John Dunning, Harold Greenberg, and Claude Heroux, if their pictures were unwelcome to the American majors, as entry to the U.S. theatrical market is crucial to recouping a substantial portion of their investments. Although potential revenues from ancillary markets are enticing, prices paid by the U.S. networks and pay-television companies depend to a large extent on a film's performance in the U.S. theatrical market. That market remains at the core of the entertainment industry, despite all the changes introduced by the new delivery systems, such as pay television and home videocassettes. The majors' direct investment in financing pictures through joint ventures must be viewed with caution. As John Dunning put it so well, the Hollywood-style film the majors force on Canadian independent producers may not be beneficial at all to the independence of those 219

Canadian Dreams and American Control

Table 18 American Majors9 Releases: In-house versus Outside Acquisitions, 1980-1986 1986a

Distributor

1980

Buena Vista In-house Pickups

4 0

2 0

3 0

3 1

3 0

5 1

2 2

4

2

3

4

3

6

4

11

7

8 2

8 10

6 18

11 3

15 1

11 2

14

10

18

24

14

16

13

16 7

15 9

15 24

11 24

10 9

4 12

5 5

23

24

39

35

19

16

10

6 5

6 8

10 2

8 5

11

14

12

13

Total Columbia In-house Pickups Total MGM/UA In-house Pickups Total Orion In-house Pickups Total Paramount In-house Pickups Total Tri-Star In-house Pickups Total Twentieth Century— Fox In-house Pickups Total Universal In-house Pickups Total Warner Brothers In-house Pickups Total

220

— —

1981

— —

1982

1983

— —

1984

1985

12 5

6 14

10 11

8 8

12 1

7 6

10 0

17

20

21

16

13

13

10

7 10

6 8

5 5

17

14

10

— —

— —

— —

— —

4 14

7 10

7 13

7 16

6 10

8 12

5 9

18

17

20

23

16

20

14

15 4

11 12

9 13

11 16

11 11

10 7

5 6

19

23

22

27

22

17

11

13 10

4 16

7 12

7 19

8 18

10 14

8 12

23

20

19

26

26

24

20

Coproductions and Merchants of Culture

Table 18 American Majors' Releases: In-house versus Outside Acquisitions, 1980-1986—Continued Distributor Total Majors In-house Pickups Total Releases In-house percentage Total Classics GRAND TOTAL

1980 1980

1981 1981

1982 1982

1983 1983

1984 1984

1985 1985

1986' 1986'

75 43 118 64 1 119

53 63 116 46 4 120

59 83 142 42 23 165

59 107 166 36 34 200

74 70 144 51 29 173

75 63 138 54 14 152

59 46 105 56 8 113

Source: Variety, June 13, 1984, p. 32; Variety, October 30, 1985, p. 3. a

Films completed or in production as of November 1985.

filmmakers. Most of those films will fail financially, but small films that can be produced quite well with Canadian talent and expertise would be seriously jeopardized if they are forced to meet the needs and priorities of the American majors. Partnership with international capital through coventure comes with a heavy price. It compromises Canada's declared goal of creating an independent culture. Historically, coproductions may have contributed to developing Canadian cinema along an industrial model, but the commercialization and standardization which denationalize films and television programs, produced with or without federal subsidies, hardly contribute to Canadian cultural expression. Cinema, in that process, is like any other commodity subject to the forces of an international market economy. It cannot be regarded as a vehicle for selfexpression and self-realization on the part of Canadian artists and audiences. That is a price Canadians can hardly afford to pay.

221

7. The Combines Law Revisited: The Gineplex Case The popular press called it a landmark case in Canadian motion picture industry history. The decision would end the long-standing film supply agreements between the U.S. majors and Canada's two largest theater chains—Famous Players and Odeon.1 According to one report, the Canadian film distribution business was "blown wide open" by the court settlement signed on June 7, 1983, between the majors and the director of investigation and research for Consumer and Corporate Affairs Canada, the federal agency empowered to execute the combines law. The American film industry bible, Variety, declared that the voluntary agreement will change the entire film marketing industry in Canada.2 Lawson Hunter, the director of investigation and research, stated in the press release announcing the agreement: "The undertakings should stimulate competition in the motion picture industry in Canada. Market forces will now be able to determine which theatre will play a picture rather than long-standing arrangements."3 It was long overdue news. An investigation launched seven years earlier by the director had not produced any substantial results.4 These undertakings, resulting from an application initiatied in 1982 by Cineplex Corporation, a fledgling Canadian-owned theater chain, had the trappings of a Hollywood drama. Media representations of the event aside, one wonders why the government of Canada intervened in the market in the first place and, secondly, why at this time in 222

The Combines Law Revisited

history. As we saw in Chapter 2, the combines law was found by the independent exhibitors to be an ineffective tool nearly 60 years ago when the Ontario government tried unsuccessfully to break up the Famous Players monopoly. I have argued before that as a dependent state with an open-arms policy to foreign capital, successive Canadian governments failed to put any teeth in the law. If so, what were the changed circumstances in 1982, both in the law itself and in the industry? One also wonders why the majors failed in their usual lobby efforts to subvert the Canadian government's initiative this time. It is also interesting to note that despite the entrenched forces—the American major distributors and the major theater chains—a competing theater circuit was built, which would eventually challenge those vested interests, at least temporarily. This chapter will discuss these issues and questions. It will analyze the historic significance of the federal inquiry, the undertakings by the majors, their impact, their limits, and their future implications for the Canadian film industry.

Gineplex Corporation Cineplex was incorporated in July 1977 to operate a chain of multiscreen theater complexes in Canada for the exhibition of motion pictures. Two innovative entrepreneurs—N. A. Taylor and Garth H. Drabinsky—pooled their resources to form the company. Taylor, a veteran exhibitor, had built and operated North America's first twin theater, the Elgin in Ottawa, in 1948. His novel idea did not catch on with other exhibitors, although Taylor never gave it up. In the 1960s, he built a triple-screen theater in Burnaby, B.C., and a quadruplex in Mississauga, Ontario. His Twentieth Century Theatres chain was absorbed by Famous Players in 1969. For some unknown reason, that contract did not bar Taylor from reentering the exhibition business which allowed him to push on with his innovative idea of multiple-screen auditoriums two decades later. Taylor claims that he invented the name Cineplex for his ambitious venture in downtown Toronto.5 Drabinsky, a lawyer who had accumulated a great deal of experience in the entertainment industry in a relatively short time, brought a high degree of entrepreneurial spirit and legal expertise to the venture.6 These qualities would serve the corporation well on the rocky road ahead. Cineplex theater operations began in April 1979 with the opening of 223

Canadian Dreams and American Control

Garth H. Drabinsky, president and chief executive officer of Cineplex Odeon Corporation. (Photo C 1986 Karsh, Ottawa.) the eighteen-auditorium multiplex cinema situated in the attractive Eaton Centre shopping mall in the heart of downtown Toronto. Unlike conventional theaters which customarily had one screen with a large seating capacity or in some cases six relatively large auditoriums with 300 or more seats per auditorium, a Cineplex theater complex contained five to twenty-one smaller auditoriums with seating for 50 to 200. Initially, these theaters were equipped with 16mm projectors, as the building code did not permit the use of 35mm projectors given the size and location of the theaters. The majors did not provide 16mm prints of their films until about a year after their initial release in 35mm, after the films had completed their theatrical runs. The policy meant that Cineplex was left with subsequent-run mass-audience films and firstrun "art" films, including those in foreign languages. It decided to target the fractured but sizable young and multiethnic audience with special viewing needs by showing art, specialty, and foreign-language films, which were not featured in the large theaters of Famous Players and Odeon. Reggae movies for the Caribbean community, Yiddish movies for the Jewish population, and Italian imports were screened at Cineplex theaters. Additionally, retrospectives of film classics were held to draw an audience not usually served by the major theater chains. 224

The Combines Law Revisited

Seven or eight weeks after the Eaton Centre's opening, Drabinsky was able to secure a "move-over" picture from a major, which produced dramatic increases in the box-office revenues for his company.7 The term move-over refers to a film that has completed its first run at a major circuit theater and is immediately moved over to another theater in the market, usually an independent, as it could still draw an audience. Drabinsky, president of Cineplex, explained the economic logic of the move-overs in the following way: We just move them over and let them play in 100 seats where there may be a gross of $4,000 a week, which is $40 a seat. If it played in 400 seats, it might gross $6,000 or $7,000 which is only $15 a seat. . . . And you don't have to spend a lot of money advertising the picture because there's already a public awareness of it.8

Drabinsky pointed to extraordinary examples such as Midnight Express and Life of Brian, which ran for sixty-eight and eighty-five weeks, respectively, to underscore the fact that some films had limitless boxoffice potential. The move-over policy's success convinced Cineplex that reaching specialty audiences with mass-appeal films, even as second-runs, was going to yield profits and lead to national expansion. Cineplex's rapid expansion was financed by some of Canada's big capitalists, including Andrew Sarlos, president of HCI Holdings Limited, a Toronto investment firm; John H. Daniels, chair and chief executive officer of Cadillac Fairview Corporation,9 a large Canadian real estate developer; and Toronto's Max Tanenbaum, owner of Max Tanenbaum Investments Inc. Cineplex had managed to secure a $1 million line of credit from the Toronto Dominion Bank. As of September 16, 1982, 61.6 percent of the issued common shares of Cineplex (3,653,573 shares) were held by the directors and senior officers of the corporation. However, Max Tanenbaum owned 18.92 percent, Nat Taylor 15.89 percent, and Andrew Sarlos 19.88 percent, which accounted for 54.69 percent of the common shares held by all the directors and senior officers of the company.10 It was a significant block of power vested in three investors. Such control of the company in 1982 by big capital and banks, however, did not automatically produce financial stability for Cineplex. It is hard to tell whether the investment of large sums of Canadian capital resulted in state intervention to protect Cineplex; I will return to that later. By September 1982, three years since its incorporation, Cineplex had expanded across Canada and into California in the United States. As Table 19 indicates, Cineplex operated 146 auditoriums in 225

Table 19 Cineplex Theaters and Their Location, July 1983 Number of Auditoriums Eaton Centre, Toronto, Ontario The Concourse, Kitchener, Ontario Upper Canada Place, Burlington, Ontario Hillcrest Mall, Richmond Hill, Ontario Les Galeries De Vanier, Ottawa, Ontario Lansdowne Place, Peterborough, Ontario Victorial Mall, Thunder Bay, Ontario South Common Mall, Mississauga, Ontario Scarborough Town Centre, Scarborough, Ontario Carlton Street, Toronto, Ontario Kanata Town Centre 2001 University, Montreal, Quebec Village Tree Mall, St. Alberts, Alberta Esso Centre, Calgary, Alberta Eaton Place, Winnipeg, Manitoba Principal Plaza, Edmonton, Alberta Warden Woods, Toronto, Ontario Beverly Center, Los Angeles, California Market Square, Toronto, Ontario Sharpson Center, Houston, Texas Royal Center, Vancouver, British Columbia Tivoli Brewery, Denver, Colorado TOTAL

Number of Seats

Opening Date

18 3

1,563 415

April 1979 December 1980

6

464

July 1980

6

423

September 1980

5

519

October 1980

6

716

October 1980

6

712

November 1980

8

633

March 1981

6

601

March 1981

12 10 6 9

1,232 979 503 829

April 1981 July 1981 August 1981 September 1981

12 9

975 852

November 1981 November 1981

7

461

December 1981

9

676

March 1982

8

868

March 1982

14

1,243

6

781

12

1,688

February 1983

12

1,200

March 1983

12 202

1,408 19,741

Source: Cineplex Corporation, prospectus, September 16, 1982, p. 7.

July 1982 March 1983

July 1983

The Combines Law Revisited

Cineplex Odeon Beverly Center, Los Angeles. thirteen Canadian cities and fourteen auditoriums at the Beverly Center in Los Angeles. Additionally, it operated three conventional theaters (the International Theatre in Toronto, the Bay Theatre in Vancouver, and the Phoenix Theatre in Ottawa), all specializing in art films. Cineplex leased all of its theaters, with terms ranging from ten to fifteen years with options to renew, essentially the same policy that Nathanson had employed in building the Odeon Theatres in the 1940s. All but three leases provided for annual rent based on boxoffice receipts with Cineplex obliged to pay all of the landlord's business and realty taxes and a proportion of the operating costs of the leased premises.11 In addition to having a national circuit, the conversion to 35mm placed Cineplex in the big leagues with Famous Players and Odeon. It would compete for the same first-run product from the majors, which under the specific historic circumstances in Canada would not come easy.12 There were further problems for the company which made it cash-poor; consequently, it was forced to go public. (We will return to that later.) Cineplex expanded on the basis of lease agreements worked out in urban and suburban shopping malls and locations near 227

Canadian Dreams and American Control

Cineplex Odeon Madison Cinemas, Toronto. universities. Drabinsky explained the rationale behind his company's choice of the locations this way: Basically our expansion focused on Odeon's weaknesses. We're very cognizant of what markets Odeon was weak in and geographical areas within those markets they're weak in. For example, Eaton Centre took advantage of the fact that Odeon did not have any screens south of Bloor Street. In Calgary, Odeon was very weak in downtown, the same in Edmonton. 13

Cineplex also had to consider the potential profitability of locating theatres in specific geographic locations in certain cities. That policy worked in the following way: "Every time we went into an area, we examined, based on the traditional arrangement of playoff, which sort of breaks Universal and Columbia were getting . . . and what level of grosses these pictures were coming off with."14 Clearly the strategy was to build a chain to compete with Odeon. It should be noted that Odeon had the right of first refusal for films distributed by Columbia, Universal, and some Fox product. The theater leases had to be in urban and suburban centers, as smaller towns could not support a large number of screens, especially if they screened art and specialty 228

The Combines Law Revisited

market pictures. Even with careful planning, Cineplex would encounter problems with the monopoly sector of the Canadian film industry. Advances in projection technology allowed up to five projectors to be threaded with the same reel, thereby reducing the number of projectionists required and driving labor costs to a minimum.15 The policy of screening a film in two or three small theaters and/or staggering the shows allowed for the efficient use of theaters and lower labor costs for crowd control. Additionally, the managers had the flexibility to increase seating capacity for a picture to 400 or 500 seats and shrink it back to as few as 70 or 75, depending on audience demand. Cineplex also owned all concession stands in its theaters which provided additional revenue. Even with these cost-cutting advantages, Cineplex had not established a presence in the market because first-run, mass-appeal movies from the majors were still out of reach. For example, On Golden Pond, a major's hit picture, played for four months in one theater in Toronto. Cineplex could not obtain the film for its downtown theaters or for a theater thirty miles away from Toronto.16 The Cineplex experience at the Beverly Center in Los Angeles (opened in July 1982), where it had access to the major's first-run films, brought home the point that the uncompetitive market situation in Canada had to be fought if Cineplex were to survive and flourish. The difference in grossing potential between Cineplex's Canadian and American operations was considerable—an average per seat gross of $15 a week in Canada compared to $42 a week in the United States.17 According to Drabinsky, there was nothing magical about Los Angeles: We opened in a market that everybody kept saying that the masses all had screening rooms in their houses, and they all had sixteen-foot television rooms in their living rooms and bedrooms; and how was a discriminating moviegoer like a Los Angelian ever going to be won over by the small-theater characteristics of the Cineplex. Of course, they were totally wrong from the beginning, because the key to the Cineplex success was the diversity of programming. And being able to move in on pictures that had money left in them but extracting from narrow markets. [It's] enough money to make it viable at low levels, but the cumulative effect [of that policy] is substantial. 18

The obstacle to profitability in Canada for Cineplex was not being able to secure the majors' first-run and move-over pictures, especially the blockbusters. Famous Players and Odeon had tied up all such films through their historic agreements with the majors. Compared to 229

Canadian Dreams and American Control

them, Cineplex's buying power was minuscule. Moreover, the two chains would not tolerate a major's film being released in a competing theater while their own theaters were playing the picture anywhere in the same market, which the industry calls playing day and date. Cineplex's very existence was threatened by the absence of first-run films. Not only was Cineplex in the red, but PanCanadian Film Distributors Inc., established in 1978 by Garth Drabinsky and Nat Taylor (the same year they founded Cineplex) to distribute motion pictures, was marginally profitable. Its profits primarily came from the new markets in videocassette and pay television. Another related company, Tiberius Productions Inc., founded by Garth Drabinsky and Joel Michaels in 1981 to produce feature films, was losing money.19 In August 1981, Drabinsky and Taylor in a bold move acquired Toronto International Studies for $1,170,000. Located on approximately 13 acres of land near Kleinberg, Ontario, with another 135 acres leased from the Metropolitan Toronto and Regional Conservation Authority, the studio was an ambitious investment. However, it was not highly profitable; its acquisition coincided with the end of the boom in Canadian feature film production triggered by the 100 percent tax shelter (see Chapter 5). By September 1982, the studio had earned a meager gross rental of $23,000 from television advertisements but not from feature film or pay-television productions as the investors had anticipated.20 Cineplex's ambitious expansion occurred at a time when Canada's economy reeled under high interest rates. The company had borrowed loans at 22 percent interest which led to a staggering debt of $20 million by June 1982. It took a heavy toll on the company's economic well-being. Cineplex lapped up capital so fast that by August of that year, its outstanding debt rose to $21.4 million,21 and its total deficit at the end of 1982 stood at a sizable $24.6 million.22 To generate additional capital to meet expenditures and press on with expansion plans, Cineplex became a publicly held company in September 1982. Several companies, including PanCanadian, Tiberius, Toronto International Studios, and Cineplex Theatres, were amalgamated under the corporate title of Cineplex Corporation with the intent that the reorganization would make the public offering attractive to investors. Although PanCanadian and Tiberius were operated separately, there was significant overlap among senior management, directors, and shareholders.23 The results of going public to raise capital were disappointing. The offering generated a total of $3.85 million. The stock, initially offered 230

The Combines Law Revisited

at $5.00 a share in the fall of 1982, was trading as low as $2.00 and $2.50 in August 1983.24 Only five months after going public, the company was ordered by the Ontario Securities Commission to cease trading shares until a clearer financial picture was provided to investors. The mammoth expansion, undertaken when interest rates had soared high, took a toll on a company pitted against monopolistic forces. Cineplex decided to trim expenses, halt a number of its ambitious ventures such as the Winter Garden Theatre, and cancel some film production plans.25 The steadily worsening situation of the company eventually pushed Drabinsky to persuade the federal government to intervene in the film industry.

Majors9 Response Generally speaking, when a new entrant attempts to break into a market dominated by oligopolies, one expects some reaction from the entrenched corporations. Famous Players and Odeon appeared to neglect the potential challenge that Cineplex would pose, at least in the beginning. Drabinsky stated that they did not take the Eaton Centre seriously, but when Cineplex began to expand across the nation there appeared to be some reaction: "I had heard comments from various individuals at board meetings of Famous Players that from a state of mild interest there had been a conscious desire or effort to reduce our business totally in the country. Odeon were not as blatant in terms of their declarations as Famous Players were."26 When Cineplex went public to raise large sums of capital, which no independent exhibitor had done earlier, it must have convinced the major circuits that Cineplex was around to stay for a long time. "That's when things began to get very messy," Drabinsky stated. One newspaper report quoted him as saying, "The most incredible case but not the trigger occurred last December [1982] when Universal refused Cineplex in Metro suburbs and at Eaton Centre access to E.T. because the blockbuster was then playing at the Hyland at Yonge and St. Clair."27 Odeon, which operated the Hyland Theatre, had not only the right of first refusal on all films distributed by Universal Pictures but also the right to exclusively play their product. The major circuits then appeared to go to battle with Cineplex with their monopoly power by ensuring that the U.S. majors' pictures would not be available to Cineplex. 231

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Cineplex's inability to secure valuable first-run pictures signaled trouble to its bankers. To increase their anxiety, Andrew Sarlos and Howard Tanenbaum, both major shareholders in Cineplex, resigned from the board of directors in the fall of 1982. Barry Zuckerman, another principal shareholder, followed suit, announcing a $1 million writedown on his investment in the company. Drabinsky had to find creative financing and reorganize the corporation in a major way to keep the bankers happy. All film production plans were canceled, and Drabinsky and Myron Gottlieb, vice-chair of the board, were forced to assume more of the risk. Drabinsky had to sell the Beverly Center Complex to TTI Movies Limited Partnership, an entity owned by the Taubman Corporation of Detroit, for $4.33 million (Canadian).28 Even then, the company came close to receivership. When the director of investigation and research filed an application with the Restrictive Trade Practices Commission on December 22, 1982, for an order against seven major distributors in Canada, it was critical timing for Cineplex. Drabinsky stated, "The application was filed within minutes of a potential receivership move by the banks against Cineplex. It was unclear whether or not the banks were going to put me out of business before Ottawa acted."29 Drabinsky believed the application had a positive effect on the future of the corporation by averting the crisis: "Once the application was filed, the publicity that emanated, together with major efforts of Myron Gottlieb and myself to refinance the corporation last Christmas [1982], bought us the time to continue the efforts with the combines people until we had the undertakings."30

State Intervention In a historic move under the combines law, the Canadian federal government decided to correct market abuses in the film distribution and exhibition business. The director of investigation and research at Consumer and Corporate Affairs filed an application with the Restrictive Trade Practices Commission (RTPC)31 on December 22, 1982, for an order against the seven distributors—Astral Films, Columbia Pictures, Paramount Productions, Universal Films (Canada), Warner Brothers Distributing (Canada), United Artists Corporation, and Twentieth Century-Fox Film Corporation. The director requested the RTPC, under Section 31.2 of the combines act, to order the distributors to 232

The Combines Law Revisited

supply commercially valuable pictures to Cineplex and other independent exhibitors. Why did the state intervene? There were at least two compelling reasons: the important changes in the content of the combines law enacted in 1976 and the near bankruptcy of a Canadian-owned corporation. The purpose of the Combines Investigation Act, according to a government document, was to "assist in maintaining effective competition as a prime stimulus to the achievement of maximum production, distribution and employment in a mixed system of public and private enterprise."32 In order to accomplish those objectives, the legislation sought to eliminate certain practices in restraint of trade and ill effects of concentration of economic power that "tend to prevent the economic resources of Canada from being used most effectively to the advantage of all."33 The state intended to intervene, when necessary, on behalf of all Canadians, to eliminate anticompetitive hence antisocial behavior of business. The central assumption is that competitive markets yield benefits to all, whereas the natural tendency of capitalists to contain or eliminate competition privileges them at the expense of society at large. Part V of the act prohibited, under criminal sanctions, certain practices which may be classified as combinations to lessen competition. They included mergers and monopolies, specified trade practices such as predatory pricing and discriminatory pricing, refusal to supply, exclusive dealing, tied selling, misleading advertising, and deceptive marketing practices.34 In the amendments passed by Parliament in 1976, the combines act carried important provisions which gave added power to the state to ensure competition and efficiency in the marketplace. All economic activities except those specifically exempt from the act—collective bargaining, amateur sports, and securities underwirters—came under the act. Prior to 1976, with the exemptions noted above, the act was applicable to articles subject to trade or commerce, certain services in connection with commodities, and the price of insurance. Hence production and distribution of films were included but not pure services such as the exhibition of motion pictures. I will return to this issue later in this chapter. The 1976 amendments gave the RTPC a dual role. Acting as a quasijudicial institution, the commission became a court of record and had the power to issue remedial orders binding upon persons to whom they were addressed. This meant that the commission could hold hearings in the matter of market abuses based on an application by the

233

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director of investigation and research. Appointed by the governor-incouncil, the commission had four members to hold hearings and to determine whether there were grounds for a remedial order and to issue the order against the respondents identified in an application. The commission also had the choice, in cases where suspected offense was involved, to send the evidence directly to the attorney general of Canada for purposes of prosecution. The act set out for each offense, whether the matter was prosecuted by summary conviction or indictment, a listing of the fines or lengths of imprisonment that could be imposed. Prosecutions for indictable offenses and certain other proceedings under the act could be conducted in the federal court, trials division, and appeals of judgments from that court could be made to the federal court of appeal, and then to the Supreme Court of Canada. Before going to trial, the government was required to obtain the consent of the accused. While the commission theoretically enhanced the potential effectiveness of the combines law, Section 31.2 of the act made it possible for the enforcing agency, the director of investigation and research, to deal with the motion picture industry in unique ways. What is exchanged in the marketplace in the industry is not a tangible commodity but the use of a comfortable seat and the service of having a motion picture unspooled for one's enjoyment—in other words, access to a film. In the distribution business, a company does not sell a film print but leases the right to exhibit it to a market of viewers under certain specified conditions. These could be length of run, number of screens, advances and guarantees, and the dollar terms of profit sharing. The law that existed until 1976 excluded such intangible commodities or pure services. With the amendments passed in 1976, not only was film exhibition included, but certain noncriminal provisions were also added to the law. This meant that the commission, after gathering all of the facts, was empowered to make remedial orders to correct monopolistic trade practices such as refusal to deal, tied selling, and exclusive dealing. In Section 31.2, the refusal-to-deal section of the act, the director had to prove to the commission that (a) a person is substantially affected in his business or is precluded from carrying on business due to his inability to obtain adequate supplies of a product anywhere in a market on usual trade terms; (b) the person referred to in paragraph (a) is unable to obtain adequate supplies of the product because of insufficient competition among suppliers of the product in the market; (c) the person referred to in paragraph (a) is

234

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willing and able to meet the usual trade terms of the supplier or suppliers for such product; and (d) the product is in ample supply.35

The commission may then "order that one or more suppliers of the product in the market, who have been afforded a reasonable opportunity to be heard, accept the person as a customer within a specified time on usual trade terms."36 Until the 1976 admendments, such tools were not available to the director of investigation and research or the MRTR This did not mean that the act was designed to give quick relief to companies alleging violations of the act by suppliers or by competitors jeopardizing the solvency of their business. The director indicated that the machinery of the Combines Investigation Act is not designed to provide quick relief in such situations. Its purpose is primarily to maintain a competitive environment over a longer run period. Although efforts are made to expedite any inquiry, the time required to complete it may be too long to assist such complainants with their immediate problems. 37

Although certain problems in the law remained regarding the strict tests applied to proof pertaining to conspiracy cases, inclusion of pure services in the 1976 amendments assisted the state in remedying losses incurred by victims of monopolistic trade practices such as Cineplex. There were other reasons motivating the state to act at this time which were outside the domain of the combines act. It may be recalled that Cineplex's expansion was financed by some of Canada's largest capitalists, including the Bronfmans. It was also a publicly held corporation, which meant that its rocky road in the film industry, an industry dominated by American transnationals, received wide publicity in the Canadian media. Additionally, Cineplex's near bankruptcy coincided with a report on film distribution and exhibition being prepared for the minister of communications, Francis Fox. The committee was headed by Ronald I. Cohen, a prominent film producer. The report was commissioned by the minister to assist in the preparation of a national film policy for Canada. In July 1982, Drabinsky was invited to attend a meeting in Ottawa called by Lawson Hunter, the director of investigation and research.38 Drabinsky apparently warned everyone at the meeting that he was contemplating a desperate move to save his company which potentially could embarrass the government of Canada: I am going to move without you guys [the director] if you don't do something about it, because this is about as blatant an effort to put a major

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company that employs a thousand people in Canada out of business as there ever has been. You guys have been procrastinating for seven years on your investigation, and if you're not going to give me the wherewithal under the Canadian legislation, I'm going to move and do whatever I can under U.S. legislation and embarrass the Canadian government.39

Drabinsky also stated that when he opened the Beverly Center in Los Angeles, he had notified the majors that he would sue them under the U.S. Sherman Act if they refused to supply first-run films to his theater complex. He went on to state, "I began to explore the possibility of moving under the foreign commerce section of the Sherman Act in terms of the distributors' activities in Canada."40 It isn't known whether Drabinsky's threat to the majors to bring suit under U.S. antitrust legislation or his warning to the Canadian government was a bluff or not, but the director proceeded to file an application with the RTPC to compel the majors to supply first-run movies to Cineplex and other independents. It took nearly five months for the director to prepare the necessary evidence with the help of Cineplex, and the application was filed on December 22, 1982. Drabinsky called it a "narrowing experience," which suggests that even with the existence of antitrust laws in the United States and Canada, the costs of seeking remedy against market abuses can be considerable and prohibitive for small enterprises in psychological and financial terms.

The Case and the Undertakings In his application the director alleged that the seven distributors named had maintained long-standing arrangements whereby they supplied and offered to supply commercially valuable pictures to Famous Players and Odeon in the specified markets to the exclusion of Cineplex and other exhibitors; that lack of access to an adequate supply of commercially valuable pictures to Cineplex had and continued to have detrimental financial effect on that corporation; that Cineplex had attempted to acquire those commercially valuable pictures from the respondents under usual trade terms but their requests had been denied; and that certain excuses given by the distributors for not providing films to Cineplex, such as nonavailability of prints and Cineplex not meeting usual trade terms, were false.41 The director supplied the respondents with particulars of the allegations following the filing of the application. The commission set May 4, 1983, as the 236

The Combines Law Revisited

date for a prehearing conference and May 30, 1983, as the date for tjie hearing to commence. The majors tried to impede the process at every stage but failed. At the prehearing conference, the attorneys for the distributors argued that the director had not provided adequate information in the allegations. Moreover, in their view, the commission had no jurisdiction to conduct a prehearing conference or to call a hearing. They filed an application with the federal court on May 3, asking that the hearing be dismissed on the grounds of denial of natural justice. They claimed the director had not provided sufficient time or information for them to reply to the application. When the commission decided to go ahead with the prehearing conference, the distributors withdrew from the proceedings. The commission simply went through the motions of the prehearing conference. As the federal court had not rendered its judgment on the distributors' application to block the hearings, the commission felt that it had the right to proceed, as well as to assume that the May 30 hearing date would be met.42 The motion at the federal court was heard on May 12, 1983, at which the Honorable Justice George Addy dismissed the distributors' application.43 He did not agree with their contention that they had no details of the allegations and no time to prepare for the hearing. He concurred with the director's position that Cineplex's near bankruptcy was central to the actions taken by the RTPC. When their only legal recourse to stop the commission failed, the distributors entered into negotiations with the director to settle the matter without going to a hearing. On June 3, 1983, the director received a letter from each of the distributors assuring him that they would make "meaningful changes in their distribution practices" to ensure that significant competition existed in the distribution and exhibition of motion pictures in Canada.44 As in a consent decree in the United States, the distributors made sure they were not agreeing to any of the allegations contained in the director's application to the RTPC. They were not admitting any guilt, thereby avoiding any future civil or criminal liability ensuing from the case. These undertakings were to become effective July 1, 1983. Astral Films, one of the seven respondents, was found to have represented Columbia and Twentieth Century-Fox to independent exhibitors in Canada. As a result, the director exempted them from the undertakings. Columbia and Fox, which maintained separate branch offices to deal with the major circuits, did enter into undertakings with the director. Following these events, the director asked for an adjournment of the hearings for twelve months, a condition set by the distributors which 237

Canadian Dreams and American Control

was granted by the commission on June 12, 1983. The major elements of the undertakings were as follows: 1. Cineplex and other exhibitors in each market are considered as "eligible exhibitors" except those who are a poor credit risk or who otherwise cannot be accepted for reasons set out. 2. Prior to licensing a motion picture, the distributor shall afford all eligible exhibitors in the geographic area the opportunity to submit offers for the motion picture. 3. The distributor shall separately advise the exhibitors of the anticipated number of theatres to be licensed for the simultaneous runs in that area. 4. The distributor shall evaluate each offer and make a decision to license a run which in its business judgments affords the best opportunity to realize the fullest economic benefit. 5. The distributor is not precluded from negotiating with an exhibitor provided that in so doing it shall not discriminate in the licensing process against any other exhibitor. 6. The distributor may not permit any exhibitor to have the right of first refusal. 7. The distributor shall disregard that any of the competing eligible exhibitors is able to exhibit the motion picture in one or more other theatres. 8. The distributor shall determine the appropriate pattern of release including the geographic areas and number and length of runs and will not be a party to any agreement or arrangement with any exhibitor to determine such pattern of release. 9. The distributor shall not agree with an exhibitor not to license another run of the motion picture unless such other run is in substantial competition with a run of the exhibitor. 10. The distributor recognizes the Director's concerns about the availability of move-over runs and agrees that ordinarily there should be no reasons why such concerns should not be accommodated. The distributor agrees that upon completion of a run it will make the motion picture available immediately according to the same procedure for the first run. 11. The distributor agrees to maintain certain records and to provide certain information to the Director upon request. 45

Results and Implications The commission required the director to issue a report six months after the undertakings were signed regarding their effectiveness. As 238

The Combines Law Revisited

Table 20 Eligible Exhibitors and Relative Market Power in the Nine Major Theatrical Markets, 1984 Percentage of Total

Number of Theaters

Percentage of total

Number of Screens

Famous Players Odeon Cineplex Landmark Twinex Others

103 94 18 9 6 22

41 37 7 4 2 8

249 186 128 19 17 47

39 29 20 3 3 7

TOTAL

252

99

646

101

Source: Consumer and Corporate Affairs Canada, Director of Investigation and Research, Combines Investigation Act, Report to the Restrictive Trade Practices Commission on the Operations of the Undertakings Given by Six Major Motion Picture Distributors, March 1984, p. 14. Note: Percentages do not add to 100 because of rounding.

noted earlier, the distributors had agreed to disclose to the director certain terms and reasons for specific licensing decisions. Consequently, some hitherto unavailable data on such business practices became available. The director obtained information on the summer and Christmas releases of the majors, two lucrative periods when they market blockbusters. The conclusions drawn by the director are, therefore, meaningful.46 The director instituted a monitoring program to assess the effectiveness of the undertakings in the following key Canadian markets: Vancouver, Edmonton, Calgary, Winnipeg, Hamilton-Burlington, Toronto, Ottawa, Montreal, and Halifax-Dartmouth. Table 20 identifies the relative market power of the major theater circuits and independents during the director's monitoring period in the nine markets. A total of 68 percent of screens in the key markets were controlled by Famous Players and Odeon. Cineplex was clearly their biggest competitor, with 20 percent of the screens under its control. The other independents accounted for 13 percent of the screens in these markets. Market power changed quickly with Cineplex consolidating its power soon after the undertakings. We will return to that issue later in this chapter. Based on the licensing decisions made by each of the signatories to the undertakings for motion pictures released during the period July 239

Canadian Dreams and American Control

1 to December 16, 1983, and January 11, 1984, to June 30, 1984, the director's office issued an interim report and a final report for the periods identified.47 Table 21 compares first-run films allocated to Cineplex in both the study periods. Of the total 1,636 first runs of motion pictures allocated by the majors during this period, Cineplex obtained 5.3 percent. It increased to 7.2 percent in the final report period. Table 22 compares first-run film licensing decisions made by the majors between the chains and independents. The independents as a whole, which included Cineplex, obtained 11.9 percent of the 1,636 first runs in the interim report period and 13.3 percent of the 1,147 first runs during the final report period. Twinex Theatres, in which Famous Players had an interest, was treated as an independent theater circuit in the reports. It accounts for the lower share of first runs received by Cineplex in both periods vis-a-vis the other independents. The director's interim report pointed out the following as the effect of the undertakings: (1) There was marked improvement in the opportunities for exhibitors to obtain subsequent or move-over runs more quickly at a time when the motion picture continues to have commercial value. (2) There was little change in the distribution pattern of first-run pictures, as 72 percent to 100 percent of the first runs of the majors were awarded to Famous Players and Odeon, who continued to receive the right of first refusal. There was improvement in the ability of an independent exhibitor to obtain first-run pictures from one distributor, and to a lesser extent from another, in situations where its theater was not in substantial competition with an Odeon theater. (3) There was a partial change in the practice of not allowing day-anddating with a major circuit. In particular, day-and-dating was being observed in the case of subsequent or move-over runs, but there was little change with respect to first runs.48 In short, the undertakings succeeded only partially by making subsequent-run pictures available to independent exhibitors but not first-run pictures. It should be noted that these data were gathered during a period when the majors knew they were being scrutinized by the director and that by making some mover-over pictures available to the independents the majors may have avoided the possibility of the case being reopened. The director's interim report warned the majors that if their first-run allocation policy did not change as per the undertakings, he would reopen the case with the RTPC. It never happened, because three months before the director issued the final report on July 31, 1984, 240

Table 21 Comparison of First Runs Licensed to Cineplex, 1983-1984 Interim Report

Final Report

Cineplex Distributors Universal Columbia Twentieth Century-Fox Paramount Warner Brothers United Artists TOTAL

Cineplex

Runs

Percentage

415 183 234 302 232 270

48 18 5 13 2 0

11.6 9.8 2.1 4.3 .9 0

285 195 207 196 321 213

44 7 19 6 18 12

15.4 3.6 9.2 3.1 5.6 5.6

1,636

86

5.3

1,417

102

7.2

Total runs

Total runs

Runs

Percentage

Source: Consumer and Corporate Affairs Canada, Director of Investigation and Research, Combines Investigation Act, Final Report to the Restrictive Trade Practices Commission on the Operation of the Undertakings Given by Six Major Motion Picture Distributors, July 31, 1984, App. 2, p. 2.

Table 22 Comparison of First Runs Licensed to Independent Exhibitors, 1983-1984 Interim Report

Final Report

Independents Distributors Distributors Universal Columbia Twentieth Century-Fox Paramount Warner Brothers United Artists TOTAL

Total runs

Runs

Percentage Percentage

415 183 234 402 232 270

87 29 15 26 25 14

21.0 15.8

1,636

196

Independents Total runs

Runs

Percentage Percentage

64 12 31 10 51 21

22.5

5.2

285 195 207 196 321 213

11.9

1,147

189

13.3

6.4 8.6

10.8

6.2

14.9 5.1

15.8 9.9

The Combines Law Revisited

Cineplex Corporation purchased the Odeon circuit, thereby making the continuation of the application process with the RTPC on behalf of Cineplex unnecessary. Although the director concluded in his final report that the undertakings provided "independent exhibitors with real competitive opportunities to obtain motion pictures,"49 his optimism was not reflected in any substantial shift in the majors' product allocation policy. State intervention on behalf of the independents, once again, did not help increase their profits or reduce barriers to entry in the theatrical exhibition sector of the Canadian film industry. The undertakings induced competition for first-run product between the two dominant theater circuits in the form of blind bidding, which had not been practiced in Canada until then. Given the historic arrangements between the majors and the two dominant theater circuits, such bidding was completely unnecessary. Blind bidding occurs when distributors require competing exhibitors in a market to bid for a picture before it is completed and available for trade screening. It allows the distributors not only guaranteed access to a certain number of screens for a specified period but also better terms such as advances and, in some cases, minimum financial guarantees—all before the picture is completed. The exhibitors often have to borrow huge sums of money to acquire a commercially valuable picture such as Return of the Jedi. In sum, it helps to reduce the risk to distributors by spreading it over the exhibitors. Consequently, most exhibitors in the United States and Canada consider this policy destructive to their goals of profitability.50 Blind bidding was described by Odeon's chairperson in the following words: playing poker with people of all kinds of income and [seeing] whether the rich guy can afford to take losses and make extravagant bids longer than anyone else. In Canada, that's Famous Players. . . . Films will be more expensive. I don't think that the profits of any exhibitor will be as high as they have been. . . . When you're involved with guarantees and a picture bombs as sometimes happens, you only need a few of them and you could be out of business.51

His words were prophetic indeed for Odeon Theatres. Blind bidding has been a contentious issue in the U.S. film industry as it enhances the economic power of the majors at the expense of the exhibitors. But not all pictures released by the majors are blind-bid. In 1984, of the eightysix films released by the eight MPAA member companies, only nineteen, 22 percent, were blind-bid.52 The balance were trade-screened or were reissues. The majors use blind bidding on high-budget pictures 243

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that are marketed as blockbusters. Pictures distributed by independents are seldom blind-bid. Nearly half the states in the United States do not permit blind bidding.53 Since blind bidding started after the undertakings in Canada, leading independent exhibitors, except Drabinsky, declared the practice undesirable. They feared that the majors would demand higher film rental terms and thereby extract more revenue out of Canada.54 There is a good deal of credibility in this argument. In a market closed to any competition, prices would obviously be depressed. When rentals from the U.S. and Canadian markets were compared, on the average, U.S. market rentals amounted to 57 percent of the box office, whereas in Canada they were only about 47 percent.55 The director of investigation and research noted that "The competition issues involved in the practice of blind bidding are not easily resolved," as price competition induced by the undertakings pushed up rental terms: While it can be argued that it represents healthy competition among distributors for the best screen time, it also represents the exertion of market power by the distributors and transfers a significant amount of the risk of motion picture production and distribution onto exhibitors. While the larger circuits may be able to withstand the losses incurred if the motion picture is not successful, a smaller exhibitor may be unable to assume the risk that would be required by making a blind bid.5

It is quite likely that the majors would exercise their market power to a greater extent and extract more revenue from Canada. Several exhibitors registered complaints with the director during this period. They dealt with delays in distribution of prints to small towns, higher film rental charged to small-town theater operators, and not making the move-overs available to independents on time.57 Another consequence of the undertakings, although inadvertent, was a higher degree of concentration by horizontal and vertical integration in the Canadian film industry. Cineplex's phenomenal growth since the undertakings is a case in point. Cineplex acquired Canadian Odeon Theatres from the Zahorchak family on June 28, 1984, beginning a course of massive expansion which, in a matter of three years, made it one of the most powerful integrated entertainment corporation in North America. The sale of Odeon became possible for two reasons. In the midst of all these changes in the industry, Micheal Zahorchak died, leaving the company vulnerable to takeovers. As indicated earlier by Odeon's chairperson, blind bidding for first-run films brought on some critical changes in the entente cordiale that existed 244

The Combines Law Revisited

between the majors and the large circuits in Canada. Odeon did not seem to adapt fast enough to the bidding and other changes.58 The combined Cineplex-Odeon chain operated 143 indoor theaters with 383 screens and 29 drive-ins with 48 screens. In February 1985, Cineplex obtained a lease agreement with Landmark Cinemas of Canada, another competing independent circuit, thereby adding 22 screens in western Canada.59 The merger was examined by the director of investigation and research, who concluded that "the facts did not give grounds to commence an inquiry under the merger provisions of the Combines Investigation Act."60 Another significant acquisition occurred on August 15, 1985, when Cineplex's U.S. subsidiary, Cineplex Odeon Corporation USA, purchased the Plitt Circuit (Plitt Theatres Inc. and Plitt Theatre Holdings Inc.), the fourth-largest theater chain in the United States. This added 574 screens in 209 theaters located in twenty-one states, with significant presence in Illinois, Texas, North Carolina, South Carolina, Minnesota, Florida, and Utah. Cineplex Odeon Corporation now controlled 1,060 screens in 391 locations in North America.61 This acquisition was financed by a 50 percent partnership with an investor group from New York, which indicates the investment community's confidence in Cineplex's dominant position to yield high profits. Cineplex had announced record results for the six months ended June 27, 1985, of $4,195,000 net income on revenues of $73,381,000.62 That was quite an achievement for a corporation that had been driven to bankruptcy three years earlier. The Plitt acquisition also meant a significant show of confidence from the banking industry in Cineplex's monopoly power. The Bank of America, a key investor in the U.S. motion picture industry,63 extended Cineplex a $65 million (U.S.) credit.64 With further growth of Cineplex's size and scope of operation, the bank extended its line of credit in 1987 for a ten-year period, to the tune of $175 million.65 It enabled Drabinsky to announce an ambitious expansion plan which included addition of another 500 screens to Cineplex by 1990 and also a major renovation program.66 Cineplex's horizontal integration with various U.S. circuits continued in the 1986—87 period. The acquisitions included RKO Century Warner Theatres, Septum, Essaness, Neighborhood, and SRO Theatre Circuits, comprising a total of 372 screens in 128 theater locations. As of April 20, 1987, Cineplex controlled 1,501 screens in 478 theater locations.67 It operated in twenty-one states in the United States and six provinces of Canada. In terms of numbers of theaters 245

Canadian Dreams and American Control

operated by one company, Cineplex Odeon Corporation had achieved the status of being the largest theater chain in North America.68 With its enhanced market power in the Canadian film industry since the undertakings and the purchase of Odeon Theatres, Cineplex also expanded vertically. It added a Toronto-based gourmet popcorn company and the Film House Inc., Canada's largest motion picture processing and postproduction facility, to its family of subsidiaries. The most significant vertical relationship occurred when MCA, a diversified entertainment company in the United States and the parent of Universal Studios, purchased a 50 percent equity interest in Cineplex Odeon Corporation for approximately $219 million.69 This massive infusion of capital allowed Cineplex to buy the other 50 percent equity interest in the Plitt Circuit from its partners.70 Both parties, MCA and Cineplex, issued press releases extolling the virtues of the partnership. Sidney Sheinberg, president and chief executive officer of MCA, stated: This investment by MCA in Cineplex Odeon indicates our confidence in the economic future of theatrical exhibition in North America and demonstrates, as well, our strong belief that the management of Cineplex Odeon is superbly suited to lead the industry to a new era of growth and resurgence. We anticipate that this investment will have a positive impact on MCA's earnings in 1986 and future years. . . . Obviously, there will be significant new opportunities available to the Canadian film industry, with Cineplex Odeon acting as a vital catalyst.71

Drabinsky, in his characteristic hyperbole, stated: This is a momentous transaction, not only for our corporation, but also for the Canadian motion picture industry. Both the size and the source of this equity participation, constituting, as it does, the largest foreign investment ever made in a Canadian controlled cultural enterprise, and coming from one of the largest and most highly regarded leisure-time companies in the world, confirms the growing vitality of the Canadian entertainment industry. 72

These structural relationships with the U.S. film industry, although not in the best interest of an indigenous film industry, certainly rewarded the senior executives, and Drabinsky in particular. Significant control of the company remained in the hands of six major Canadian investors and MCA—which held 100 percent (23,055,084 shares) of the subordinated restricted voting shares—as indicated in Table 23. Drabinsky and Gottlieb, the two partners who were instrumental in reorganizing Cineplex to go public in 1982, and Charles Bronfman, 246

Table 23 Security Ownership of Cineplex Odeon Corporation by Management and Others, January 31, 1987 Beneficial owner

Number of common shares

Percentage of class before offer

Percentage of class after offer

Percentage of class assuming conversion

Garth Drabinsky Myron Gottlieb Charles R. Bronfman Pentrust Holdings & Company James D. Raymond David B. Fingold

2,026,584 2,011,379 1,823,460 1,672,834 1,172,453 1,000,575

11.24 11.17 10.04 8.83 6.42 5.45

9.34 9.29 8.36 7.40 5.35 4.54

4.53 4.5 4.06 3.66 2.61 2.22

Source: Cineplex Odeon Corporation, prospectus, March 26, 1987, p. 27. a

This assumed conversion of Subordinate Restricted Voting Shares. Also note that MCA was not allowed to hold any common shares under their partnership agreement with Cineplex.

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who financed Cineplex's rapid expansion, are the trinity atop the pyramid of power. Of the voting securities issued prior to January 31, 1987, Drabinsky controlled 11.24 percent, Gottlieb 11.17 percent, and Bronfman 10.04 percent. The aggregate total of their control accounted for 32.45 percent of the total voting securities, a significant block of power in the hands of three persons,73 considering that it is a publicly held corporation. In terms of cash compensation paid to the executive officers of the company, the eleven officers received a total of $3,310,978 for fiscal year 1986. Of that amount, Drabinsky received $946,672, or approximately 2.84 percent.74 In the fiscal years 1983 to 1986, net value of the stock options granted to the eleven officers as a group amounted to $4,483,398, of which Drabinsky received the lion's share, $3,347,167. The stock options were exercised, and the benefits were realized by the officers.75 Not included were options outstanding at the end of 1986, which for Drabinsky amounted to 600,000 common shares, and for the eleven executives together, 1,148,000 common shares.76 In March 1987, Drabinsky and Gottlieb each purchased 750,000 common shares from the corporation at a price per share of $17.50, amounting to a total price of $26,250,000.77 This may be considered fair compensation for people who were going to be driven out of business by the monopoly sector. But after becoming a part of it, they were being rewarded rather handsomely for it. In fact, Cineplex, which had teetered on the brink of collapse in December 1983 because of aggressive financing, theater acquisition, and first-run pictures from the U.S. majors, could be considered quite a success story for entrepreneurial capital. Cineplex's gross income increased from $86,905 in December 1984 to $500,615,000 in December 1986.78 The main problem with Cineplex's success is that it was caught in the contradiction of having to make an alliance with international capital—the American film transnational—-just as the Aliens had done in the early 1900s, Famous Players starting in the 1920s, and Odeon later. State intervention by way of combines law did not enhance competition in the distribution and exhibition sectors. Instead, Canada's branch plant film industry further consolidated its power over the Canadian market. Instead of Paramount's domination of the Canadian theatrical market through Famous Players, MCA—another major—assumed a significant market position. The MCA—Cineplex Odeon combination, which was larger than Paramount—Famous Players, caused grave concern among independent film companies and moviegoers in the United 248

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States. For example, in Chicago, which is the second-largest theatrical market, 55.6 percent of the 268 first-run screens came under the control of Cineplex Odeon when it acquired the Plitt circuit.79 The immediate result of their dominance was felt by the moviegoers as ticket prices increased from five dollars to six dollars. In the New York area, Cineplex Odeon theaters began charging a record admission price of seven dollars. Some public groups issued a call for a boycott of the theaters and were joined by Ed Koch, the mayor of New York.80 The concentration of economic power in the branch plant film industry in Canada and the high degree of control of the Canadian market by the majors are disadvantageous not only to moviegoers but also to the unintegrated Canadian-owned firms in exhibition, distribution, and production. The failure of the combines law to correct market abuse is a clear indication of how nineteenth-century solutions are inadequate in solving economic and cultural problems created by conglomerate corporations, which draw their power from large economies of scale (global markets) and control over a variety of goods and services. For a remedy to this problem, the unintegrated Canadian-owned enterprises should look to Parliament rather than the combines law. It is important to note that while benefits to the Canadian filmmakers can hardly be ensured from Cineplex Odeon Corporation, the individuals who were the prime movers in expanding and ensuring Cineplex's profitability have been well rewarded. Various annual reports tout the opportunities given to Canadian feature films for public relations purposes, just as Famous Players had done in the 1970s. The issue of an indigenous Canadian cinema was not even on the agenda of its stock owners to begin with.81 However, bigger dividends are. Drabinsky met their expectations in the short run, thereby winning approval for his high salary. If, as a result, Cineplex became a major circuit for American films and a middle agent channeling profits out of the country's growing theatrical and ancillary markets to transnational' home offices, so be it. That is the very essence of being a merchant capitalist. Merchant capitalists are sufficiently compensated for moving goods and services rather than producing them in the country. They argue for national control over the nation's assets when it suits their purposes, as we have seen Drabinsky do. They seek state intervention when they are pitted against international capital. But when it is profitable to join hands with those very forces, they invoke the myth of the free market. Time and again, this seems to have occurred in the Canadian film industry. Consistent with their class 249

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character, the comprador elements would oppose any intervention by the state in restructuring the distribution sector, as we will see in the next chapter. Such capitalist forces in Canadian society that have benefited from a relationship with U.S. imperialism have often argued for a continental economy in the form of "free trade." Although nationalist elements won the debate in the past, the argument reemerged in the 1980s.

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Free Trade Anxieties: National Institutions and Cultural Autonomy Canada as separate but dominated country has done about as well under the United States as women, worldwide, have done under men; about the only position they've ever adopted toward us, country to country, has been the missionary position, and we were not on top. I guess that's why the national wisdom vis a vis Them has so often taken the form of lying still, keeping your mouth shut and pretending you like it. But as part of Them, at least we'd get to vote, eh? We'd sure as heck fit in, we already know more about them than we know about one another, or so you'd think. —Margaret Atwood

Margaret Atwood's stinging remarks1 capture the essence of U.S. cultural domination and how it is integrated into the social fabric of a politically separate country. Atwood, a popular novelist, spoke to the Parliamentary Committee on Free Trade, which held hearings on the proposed policy to reduce any trade barriers between the United States and Canada. Representatives of the two governments initialed a draft agreement in the fall of 1986 to open their borders to unrestricted trade, kicking up a stormy debate in Canada regarding the potential loss of national sovereignty. Not only 251

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did Canadians express anxiety over surrendering their enormous natural resources to the American transnational—land, oil, forests, minerals, water, hydropower, the seabed, to name a few—but also the entire cultural arena already swamped by U.S. products. The free trade debate offers another unique opportunity to observe how the institutions of a dependent capitalist economy reproduce that dependency. I argue that despite the pressure on Canada by the United States, the imperial link is actively reproduced by Canadian institutions, as can be seen in the motion picture industry.

Prelude to Free Trade and Institutional Agendas I noted before that the minister for communications, Francis Fox, appointed a task force in 1982 headed by Ronald I. Cohen, a leading film producer, to study the distribution, exhibition, and marketing of films in Canada. The task force was asked to recommend policy options for the minister to improve opportunities for Canadian films. The recommendations were to become part of a new national film and video policy the minister was preparing to announce sometime in 1983. The rememdies recommended by the task force, although important as historical precedents go, did not threaten the power of the American majors and their allied circuits. It recommended a National Cinema Act to govern all distributors and exhibitors. The country was to be divided into key territories and subkey territories, and a release pattern for first-run films was to be devised based on a formula. A distributor releasing a film in twenty or more markets where competing theaters existed, while being free to choose the theaters in which the film would be exhibited, could not select more than 75 percent of the theaters during the course of the first run in either the key or subkey territories from those screens controlled by the same company.2 The policy would essentially restrict a distributor from occupying all the screens of a major theater circuit in each market by limiting the release of a first-run picture to 75 percent of a company's screens in key and subkey markets. The task force avoided the option of screen quotas to ensure market access to Canadian films but suggested the act contain language making screen quotas available to the Canadian government, if needed.3 It is important to note that the committee did not recommend open competition for first-run films among theaters in the same geographic 252

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region, as the director of investigation and research had attempted to do under the combines law. Instead, the committee advocated zoning of Canada's theatrical markets. After a first-run picture played the major circuits, independent exhibitors would receive a reprieve from zoning in terms of obtaining second runs. The task force clearly recognized how the lack of competition in the exhibition and distribution markets adversely affected Canadian film producers and distributors, but it only suggested a minor alteration of the relationship. It is interesting to note the similarity in approach taken by the task force and the director of investigation and research under the combines law (as shown in Chapter 7). On the one hand, the report acknowledged that the Canadian film industry structure was dominated by foreign oligopolies in collusion with major circuits and was harmful to Canadian filmmakers, but on the other hand, it suggested the already tried and failed solution of the market performing its own magic. In the long run it meant that essential control of the Canadian market would remain in the hands of American-based transnational corporations and their allied theater circuits in Canada. It is also important to consider the significant differences between the mandates, powers, weaknesses, and the overall agendas of the state agencies involved in the motion picture industry. While the minister of communications is bound by the larger obligation of ensuring that Canadian cultural industries flourish and that they promote national cultural identity, Consumer and Corporate Affairs Canada has a different and conflicting function. Its main guide is the combines act, the goals of which include, "protection of consumers and businessmen against exploitation through restrictive agreements or exercise of monopoly power, the wider objective is the protection of the market system itself."4 The underlying assumptions are that competition ensures efficient allocation of resources and enhances productivity, the benefits of which can be passed on to the publics involved. As we have seen so far, this approach to the problems of the Canadian film industry simply preserves the power of the American transnationals and their allied circuits, while keeping the unintegrated sections of the industry weaker. The market system that the combines law is meant to preserve is a distorted one, dominated by foreign transnationals with certain structural and other ties to large capital in Canada. The minister of communications, who has more flexibility in formulating policy related to cultural industries, can be innovative and-visionary in attempting to protect and enhance Canadian cultural interests. The exact opposite is also possible, where the Ministry of Communications is 253

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vulnerable not only to the pressures of the international capitalists (MPEAA) but also to the pressures of the national capitalists and the Ministry of Finance (Chapters 2, 4, and 5). In making policy, it has to decide whether to protect the profitability of Canadian-owned unintegrated enterprises or risk the wrath of American transnational, the U.S. government, and big Canadian capitalists (as those found in Cineplex). The historical pattern of making policy in the ministry suggests that, rhetoric aside, U.S. film industry monopoly power in Canada is not jeopardized. The agencies of the federal government pursue separate agendas with the net outcome being the perpetuation of Canada's cultural dependence on the United States. Some other events in the 1982—83 period, related to cultural policy inside and outside the film industry, indicate that Canada's approach to policymaking was riddled with problems as expressed by the conflicting mandates of certain state agencies. This is clear if we consider the actions taken by the Ministry of Communications and the Foreign Investment Review Agency (FIRA) toward the acquisition and control of Canadian businesses by transnational conglomerates. We may note that Parliament enacted the Foreign Investment Review Act in 1973, recognizing the concerns Canadians held about national sovereignty, given the overwhelming presence of foreign capital in the country. The act states: the extent to which control of Canadian industry, trade and commerce has become acquired by persons other than Canadians and the effect thereof on the ability of Canadians to maintain control over their effective environment is a matter of national concern, and that it is therefore expedient to establish a means by which measures may be taken under the authority of Parliament to ensure that, in so far as is practicable after the enactment of this Act, control of Canadian business enterprises may be acquired by persons other than Canadians, and new businesses may be established in Canada by persons, other than Canadians, who are not already carrying on business in Canada or whose new businesses in Canada would be unrelated to the businesses already being carried on by them in Canada, only if it has been assessed that the acquisition of control of those enterprises or the establishment of those new businesses, as the case may be, by those persons is or is likely to be of significant benefit to Canada, having regard to all of those factors to be taken into account under this Act for that purpose. 5

Although it is cautiously worded with warnings of practicability, the act was tested in the motion picture industry during the 1980s in three cases where ownership changes in the U.S. corporate world affected 254

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Canada: the acquisition of Columbia Pictures by the Coca Cola Company and attempts by Orion Pictures and Walt Disney Productions to enter film distribution. In 1982, Coca Cola announced its intention to purchase Columbia in the United States, including its subsidiary in Canada. Francis Fox, the minister of communications, opposed it and requested that FIRA review the case.6 As Columbia operated on an extraprovincial license in Canada, it was not considered a Canadian subsidiary of the U.S. transnational for the purposes of FIRA. Consequently, FIRA declared that it would not review the case. So Columbia (Canada) became a part of the leisure holdings of Coca Cola in the United States. Orion Pictures, an integrated motion picture production and distribution company in the United States, joined the ranks of the majors in 1983. It is historically rare that a new entrant is accorded the status of a major in the U.S. film industry and allowed membership in the Motion Picture Export Association of America. Warner Brothers became a major in 1928, as a result of the enormous profits it made in the talkies, which helped the company acquire first-run theaters. R.K.O. Pictures, which was created by RCA mainly to market its Photophone sound system to movie theaters, achieved that status. RCA set up the company as a vertically integrated operation. Between 1948 and 1983, however, no new corporation gained the status of a major. In recent years, key executives leaving a major firm have been able to secure a line of credit and contracts with talent to make pictures on a regular basis. Orion Pictures was created in 1978 by Arthur Krim, Eric Pleskow, Bob Benjamin, Bill Bernstein, and Mike Medavoy, who left United Artists after becoming dissatisfied with its parent, Transamerica Corporation.7 Krim, a leading New York attorney with good connections to Wall Street investors, was able to secure a line of credit of approximately $250 million to start producing movies under the Orion Pictures banner. He had worked out a distribution deal with Warners but found that it was not promoting Orion films satisfactorily. By 1983, he decided to go into distribution and acquired Filmways, a minor production and distribution company, which was a member of the MPEAA. Tristar, another newcomer, entered the industry in April 1984 and gained the status of a major because it was a combination of three corporate giants—Columbia Pictures, Home Box Office (a subsidiary of Time-Life), and the Columbia Broadcasting System. Orion's horizontal integration with Filmways and its intention to enter film distribution in a big way had important consequences for Canada. Filmways had a subdistribution deal through Ambassador, a 255

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Canadian-owned company in Toronto. When Orion acquired Filmways, Ambassador lost that source and a substantial part of its business. Orion applied for permission from FIRA to start a branch office to conduct business in Canada but was denied because of objections from the Ministry of Communications. The ministry believed that Orion's entry would further erode the already weak economic position of independent Canadian-owned distribution enterprises. In September 1983, FIRA found that Orion's business would not produce any significant benefits for Canada.8 But less than a year after that decision, FIRA reversed its stand and invited Orion to reapply. FIRA's actions are considered privileged information under law, and consequently officials would not explain the reasons behind this reversal. We will return to the issue of foreign investment in film distribution later, but it is enough to say that Canadian policymakers sent mixed signals to American monopoly interests regarding two important cases. The Government of Canada headed by the Liberal Party announced the National Film and Video Policy in 1984. Under the subheading "Access to Screens—The Last Hurdle," the document recognized the historic problem of foreign transnational corporations' control over Canadian theatrical and film markets. The minister, Francis Fox, spoke in grandiose terms about the economic and cultural importance of the film and video industries: [Both] culturally and economically, the potential of the Canadian film and video sector remains unfulfilled. Very few Canadian productions reach the vast majority of Canadians, let alone audiences in other countries. This uncomfortable reality bodes ill as we enter a new technological environment in which the flood of foreign productions into Canada is rapidly swelling into a tidal wave. We face, in short, a cultural crisis of undetermined proportions. 9

Such cliche-ridden statements by the government over national cultural sovereignty ring hollow when compared to what it proposed to do. Citing the examples of France, Spain, the United Kingdom, and Brazil, which had implemented screen quotas to guarantee market access to locally made films, the minister argued that such quotas would limit the range of viewing choice available to Canadians. His government preferred negotiation with the MPEAA rather than regulation of the market in the interest of Canadian productions.10 Once again, unfettered access to Canada for the American majors was preserved by the Canadian government. 256

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These mixed signals should be read as a reflection not only of conflicting agendas of the federal agencies involved in making policy with respect to monopoly power in Canada but also of the changing political emphasis on economic and cultural autonomy in the country during the 1980s. The euphoria surrounding the 1980 national economic policy which was guided by the principle of building autonomy from foreign, particularly American, capital had dissipated under the enormous pressures brought on by a global recession. The outstanding issues between the United States and Canada—acid rain, oil company monopoly, Reagan's monetary policy, border broadcast stations— which had characterized the interstate tensions in 1980—81 had gone nowhere.11 In fact, Prime Minister Trudeau's nationalist rhetoric, which dominated the annual economic summits of previous years and gave the appearance of open hostility toward American capital, had disappeared by 1983. The shift in the national policy of economic and cultural autonomy may have resulted partly from the danger to American capital in Canada perceived by the U.S. government and transnational corporations. Canada's capitalist press played an important role in reinforcing the power of transnationals in the Canadian economy. For instance, the prominent English-language daily, the Globe and Mail, attacked FIRA and Francis Fox's limited attempt at containing the power of American transnationals in Canada's cultural industries. When FIRA denied the acquisition of J. P. Lippincott's Canadian subsidiary by Harper and Row, claiming that it would reduce shelf space given to Canadian authors, it was identical to the problems faced by Canadian filmmakers in the nation's theaters. An editorial in the newspaper castigated the government: "This is exactly what is turning U.S. investors away from Canada. If FIRA is encouraged to do this to people already owning property here, it is sure to discourage new investors, and it appears to be doing it with the direct encouragement of the government. It is an appalling story."12 The premiers of Canada's ten provinces, faced with a deflated dollar and high unemployment, had voted almost unanimously in 1982 to abolish FIRA. In an emergency federal budget submitted to Parliament in June 1982, the government softened the guidelines that FIRA applied to foreign investors. With the arrival of a conservative government in Ottawa in 1984, headed by Brian Mulroney, FIRA was renamed Investment Canada to reflect a changed agenda at the top levels of the policymaking pyramid. Any false notions of national economic and cultural autonomy that were created during the Liberal 257

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regime were swept away in the storm of Reagan conservativism, which spread from the center of the world capitalist system. Because of the close geographical relationship, and because Canada was the leading trade partner of the United States, the neighbor to the north would abandon the earlier posture of national control and collapse into considering an open trade policy with the United States, a project initiated by Trudeau and continued by Mulroney.13

A Distinct Canadian Market? While the Mulroney government prepared to negotiate a free trade deal with the United States in 1983, Canadian independents in the film industry pressured Quebec and the federal government in Ottawa to ensure maintenance of national control over film distribution. The issues of ownership, lack of market access, and profitability for Canadian distributors once again became the preoccupation of the governments of Canada and Quebec in 1985. They would get caught up in the tempest of the free trade agreement. Over the years, the majors had squeezed Canadian distributors by monopolizing screen time and by buying up a supply of Englishlanguage films from American and other independent distributors. They also purchased the North American rights to feature films produced in the United States by independents. This meant, for all practical purposes, that Canada did not exist as a separate market. The independent producers, who made a deal with the majors, sold Canada as part of the U.S. domestic market, thereby preventing a Canadian company from acquiring the rights to the films. Although Canada is considered to be 10 percent of the U.S. domestic market in terms of the size of revenues it produces, the majors obtained the territory at no extra cost. Some of the majors started what they called Classics Divisions around 1980 to buy up entire libraries from distributors outside Canada, thereby eliminating the supply to Canadian-owned distributors. These policies devastated several independent distributors in Ontario. Martin Bockner's Saguenay Films, Mickey Stevenson's Ambassador, and Linda Betha's New Cinema were all victims of the policy in English Canada. The Quebec distributors, who had found some space to operate in that market by importing French, Italian, Greek, and other foreign films, began to see their product disappear. Rising production costs and declining movie audiences, particulary outside the major urban centers 258

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because of videocassette recorder penetration, meant hard times for filmmakers, distributors, and exhibitors of Quebec-made films. The majors' expansion into non-American film distribution in the early 1980s dried up the Quebec distributors' vital supply, thereby leading to an overall decline in their economic position. They would use whatever political clout they had with their provincial government to put limits on such predatory market conduct of the American transnational.

Quebec's Cinema Act Quebec led the first fight to demarcate Canada as a separate territory for films, primarily because the Parti Quebecois with its platform of Quebec independence had come to power in 1981. Autonomous cultural development of Quebec was an important item on the party agenda, and its rise to power coincided with depression in film production. Despite the artistic accomplishments of many Quebec directors in the 1970s, only one film was made in Quebec in 1981. The majors' occupation of the screen time had reached such serious proportions that in 1982—83, the Quebec minister for cultural affairs had to call Millard Roth, the president of CMPDA (MPEAA's branch plant in Toronto) to get Les miserables released in Quebec City, the capital of the province.14 Furthermore, lengthy delays in releasing French versions of American films concerned the Parti Quebecois government, which saw it as further erosion of French language and cultureJn the province and additional evidence of the dominance of English culture in North America. The Cinema Law, passed in 1975, was inadequate and failed to deal with the problems of the industry. The state found it necessary to step in to make sure Quebec was different from the rest of North America as far as cinema was concerned and to create favorable conditions for Quebec artists to contribute to Quebec culture.15 The government of Quebec established the Commission d'Etude sur le Cinema et 1'Audiovisuel in January 1981, with Guy Fournier as president. It held hearings for nearly two years and submitted a report called Le cinema: une question de survie et d'excellence, in June 1982. Its recommendations formed the basis for Bill 109, which was tabled in the National Assembly in December 1982. Unlike in the past, when public policy aimed at altering the economic conditions in the film industry simply succumbed to the notion of laissez-faire, the Parti Quebecois clearly intended to alter it. As the 259

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minister of cultural affairs stated, "To consider only the laws of the market, and, in addition, to promote that option, would mean to turn over Quebec's cinema industry to the American majors, bound hand in foot. This would be tantamount to assassinating Quebec's entire cinema industry."16 Although Bill 109 did not contain any provisions to legislate a screen quota to assist Quebec films, it went to the heart of U.S. ownership and control of distribution in the Quebec market and attempted to restructure it favoring Canadian/Quebec entrepreneurs.17 At the first reading of the bill in the National Assembly on December 17, 1982, the government stipulated that any company involved in commercial distribution must be 80 percent Canadian-owned, just as the federal Broadcasting Act of 1968 had stated with respect to broadcast stations.18 Public hearings of the parliament commission were held from February 22 to 25, 1983. The MPEAA attacked the bill as too radical a measure which would eliminate its members from the Quebec market. It further argued that its members had operated in Quebec for nearly sixty years and that those "acquired rights" must be preserved by the Bill.19 According to that argument, entry into a sovereign nation was not a privilege with certain responsibilities but a right. It was a convenient argument for transnational capitalists and their cartels. During the second reading of the bill in the National Assembly, some opposition members acknowledged that having decisions affecting Quebec audiences made outside Canada or in Toronto was not beneficial to Quebec. During the third reading of the bill, however, important compromises were made due to the political machinations of the MPEAA.20 Section 105 recognized the acquired rights of the MPEAA companies and stipulated that such companies could obtain a special license to distribute any film they had produced or that held world rights.21 The state's intention shifted from eliminating the majors from the Quebec market to turning over a significant portion of the distribution business to Canadian-owned companies. Two more sections were added to the bill. Section 109 provided for mandatory reinvestment of a portion of the gross distribution income, not to exceed 10 percent, in Quebec films. Section 115 intended to alter the conditions of run and clearance given to Famous Players and Odeon Theatres, the two national circuits, by the majors.22 Those policies unduly delayed second-run films from being made available to Quebec-owned theater operators, thereby limiting their profitability. Section 115 also stipulated that after a film was exhibited for a week in Quebec, its distributor was required to lease it to any exhibitor able to meet competitive terms and 260

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conditions. These provisions were rejected by the MPEAA.23 While the threat of a boycott by the MPEAA hung over the National Assembly, Bill 109, although compromised, was unanimously ratified, becoming law on June 23, 1983. The Cinema Act of 1983 created a new institutional structure to develop the Quebec film industry. La Regie du Cinema was to be the regulatory body, the Institute Quebecoise du Cinema was to play the advisory role to the government, and the Societe Generate du Cinema was intended to provide financial assistance to Quebec artists.24 Following the passage of the bill, the Regie was mandated to draft the necessary regulations to implement the law, particularly Sections 105, 109, 114, and 115. At the same time, Clement Richard set up a special negotiating committee headed by Guy Fournier to reach an agreement with the MPEAA on the eventual implementation of the act.25 Millard Roth of the MPEAA and Guy Fournier drew up a draft memorandum of understanding which was presented to the minister of cultural affairs on September 14, 1984. Section 105 of the act stated, "A special distributor's license may be issued only to a person who, in accordance with the regulations of the Regie, is the producer of the film or holder of the world rights to the film and who on 17 December 1982 held a license issued under section 30 of the Licenses Act." The Roth-Fournier memorandum interpreted the term producer by favoring the majors: [The] term producer shall refer only to the producer of a film originally produced in the English language and should be applied only to a person possessing a substantial or material interest in this film. Is deemed to possess such an interest, a person who has invested no less than one million dollars U.S. in either of the following manners: as payments in production costs or in consideration of the rights to theatrical distribution in North America.26

The draft agreement defined the holder of world rights as "a person possessing the rights of theatrical distribution throughout the entire world, save and except Iron Curtain or Communist or Eastern Bloc countries or their allies."27 As can be seen, these regulations would have left the door wide open for the majors to continue to market English-language films in the same manner they had done before. The films they would acquire from independent producers, called pickups, would not become available to the Canadian independent distributors, as "substantial interest" was watered down to include a minimum investment of $1 million in a film. In exchange for agreeing 261

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to these interpretations of the key words in the act, the MPEAA demanded a three-year moratorium on Section 109 (reinvestment in Quebec films) and Section 115 (quicker second-run releases) from the Quebec government.28 This draft agreement was rejected by the Regie as well as the Quebec distributors. Clement Richard supported the Regie and instructed it to continue drafting the regulations.29 The negotiating committee mechanism effectively delayed drafting of the regulations by the Regie. In May 1985, the Regie published its draft regulations concerning Section 105 of the Cinema Act in the official Gazette, which was opposed by the MPEAA. The Regie's interpretation of the key terms was as follows: [Producer] means any person holding at least 50% of the financial interest in a film; . . . financial interest means the investment of money, goods, or services; . . . holder of world rights means any person holding the distribution rights to a film for the country of origin of the film and for the following countries: Canada, the United States, Belgium, Luxembourg, the Netherlands, Denmark, France, the Federal Republic of Germany, Ireland, Italy, Great Britain, Greece, Spain and Portugal.30

The government of Quebec was not ready to implement the law because the MPEAA's lobbying tactics began to yield results. Jack Valenti appeared on the scene in August 1985 and called on all the members of the Parti Quebecois Cabinet to persuade them not to implement the law.31 Valenti also tried to meet with Premier Rene Levesque. President Reagan raised objections to the law with Prime Minister Mulroney.32 The government of Quebec decided to delay enforcement, particularly Section 109 regarding reinvestment of the majors' profits in Quebec films. More public hearings followed the announcements of the Regie's regulations. While the majors opposed the regulations, the various Canadian and Quebec professional associations supported them and urged the enforcement of the act.33 In a Cabinet reshuffle on October 16, 1985, Gerald Godin replaced Clement Richard as minister of cultural affairs. He continued to negotiate with the majors, but the draft regulations prepared by the Regie were never acted upon by Cabinet. By now, the political foundations of the Parti Quebecois were shaken, and an insecure government decided to delay passage of any controversial regulations that would precipitate a boycott by the American film industry. In the Quebec elections that followed, the Liberal Party defeated the Parti Quebecois and assumed power on December 2, 1985. Lise Bacon was appointed minister of cultural affairs. Subsequently, she hired 262

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Francis Fox, former federal minister of communications, to negotiate a settlement on the controversial sections of the Cinema Act. Fox had met all the heads of MPEAA companies and knew Jack Valenti personally. The Quebec government probably thought he could bring home an agreement with the majors. On October 22, 1986, Bacon and Valenti signed an agreement resolving the disputed sections of the act, which was to take effect on January 1, 1987, and last five years. Although the impact of the agreement on the Quebec film industry could not be fully assessed, one researcher estimated that if it had come into effect in 1984, approximately 4.7 percent of a total of 128 films distributed by the majors in 1985 would have been available to Quebec distributors. In 1986 and 1987, 2.8 percent of 143 films and 3.7 percent of 271 films distributed by the majors would have changed hands. The estimated percentage of business transferred to Quebec distributors for the three years would have been 0.2 percent, 0.1 percent, and 0.2 percent, respectively.34 If these estimates are correct, the agreement accomplished little, if anything, in terms of shifting a fair share of the distribution business to Quebec-owned independent companies as intended by the Cinema Act. In fact, the power of the majors was strengthened by the agreement, foretelling a bleak future for the Quebec independents. Consider the following conditions.35 (1) The majors could distribute a non-English-language film in which they had invested 100 percent of the negative cost. The majors had to obtain a special license from the Regie to do so, but such a request could be granted at the special discretion of the minister of cultural affairs, by satisfying her regarding the importance of the investment made by a major in that film. (2) A major could distribute English-language films for which it held world distribution rights or distribution rights for Canada, the United States, the member countries of the European Economic Community, Japan, Australia, and New Zealand, excluding the country of origin of the film. To establish the status of producer for a film, a major had to prove that it had already invested or expected to invest 50 percent of the total value of the funds invested in the film or, at its option, $4.5 million (Canadian). Total value of funds invested in the film included, as per the agreement, negative production costs, negative pickup costs, and costs for prints, advertising, publicity, and promotion. These two provisions left the door wide open for the MPEAA companies to conduct business as usual in Quebec. (3) The agreement legitimized horizontal combinations of MPEAA members by stating that "Any Member may distribute in Quebec the films of another Member." This anticompetitive provision further helped 263

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the already powerful majors. The agreement also provided a special concession for Paramount to continue distributing the films of Atlantic Releasing Corporation, an American independent distributor in the Quebec market. We will return to this issue later. Although the agreement was signed in October, it stipulated that beneficiaries would be any members of the MPEAA as of January 1, 1987. This loophole benefited smaller American film companies such as Canon, Lorimar, Embassy, and New World, all of whom joined the MPEAA and established a direct presence in the Quebec market. The reaction to the agreement from the film industry was mixed.36 Many independent distributors and exhibitors clearly saw no benefits under the agreement but were cautious in not denouncing it, probably because of the changed political conditions in Quebec, and for that matter in the rest of Canada. Perhaps they thought the agreement kept European and potential American independent competitors out of Quebec. Clement Richard called it a "complete surrender to the MPEAA."37 A high-level Quebec official in the ministry of external affairs, who wanted to remain anonymous, remarked, "Was Francis Fox working for Jack Valenti?" The prospects for the Quebec film industry's autonomous growth which were raised during the Parti Quebecois regime, when cultural sovereignty was a key issue, were destroyed by the agreement with the MPEAA.

Federal Distribution Bill On the federal level, in 1985, another film industry task force, cochaired by Marie-Jose Raymond and Stephen Roth and consisting of prominent English and French Canadian producers and distributors, provided the opportunity for the Canadian film industry to seek control over the Canadian theatrical and video markets. The task force report, entitled "Canadian Cinema: A Solid Base," identified three major structural problems impeding the development of a national film industry in Canada: (1) foreign domination of film and video distribution, (2) chronic undercapitalization of production companies, and (3) concentration of theater ownership and the vertical integration of distribution and exhibition.38 The task force's first recommendation was control of distribution by Canadian-owned companies by appropriate legislative and regulatory measures.39 The task force, however, did not recom-

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mend elimination of foreign control of the Canadian market by American producer-distributors. It only suggested shifting some control over to Canadian-owned distributors and thereby a portion of the distribution revenues. The report became the foundation for Flora MacDonald, who succeeded Marcel Masse as minister for communications in July 1986, to propose a new bill to regulate distribution in Canada. Two events may have pushed the new minister to announce the distribution policy: Paramount's raid of Norstar and the MPEAA's agreement with Quebec. Norstar, a Canadian-owned company, had worked out a subdistribution agreement with Atlantic Releasing of New York under which it marketed independently produced American and foreign films in Canada. This amounted to approximately two titles per month for Norstar. After about two years of this relationship, Paramount Pictures bought out the subdistribution from Atlantic Releasing, thereby cutting off Norstar's supply. More importantly, it made sure that its wholly owned Famous Players circuit would have this supply. Daniel Weinzweig, president of Norstar and also a member of the Raymond-Roth task force, emphasized that Paramount's raid to eliminate competition from a Canadian-owned company resulted from the persisting structural problems identified in the task force report.40 He noted further, "We hope that it sends a clear signal loud and clear to Ottawa and Mr. Mulroney in particular, who seems to think the Americans can do no wrong."41 The response from Ottawa was a timid acknowledgment that Paramount's raid of Norstar's supply was a transaction between two American companies. Jeremy Kinsman, assistant deputy minister of cultural affairs at the Department of Communications, told a cultural sovereignty forum in Toronto, "We are going to do something about it. I don't expect the Norstar situation will happen again," signaling the fact that a new policy was afoot.42 MacDonald announced in February 1987 that the government would introduce legislation that would institute a licensing system for the importation of films headed for commercial distribution in Canada. Canadian-owned companies would be entitled to a general license enabling them to import any foreign film. Foreign companies, however, would be eligible for a proprietary license. This meant that foreign-owned distributors could import only those films into Canada for which they held world distribution rights. It limited foreign-owned distributors from importing only those films in which they had a significant financial risk and made available those films called pickups for

265

Canadian Dreams and American Control

Canadian-owned companies.43 The government hoped that these measures would help Canada become a distinct market for feature films and video distribution in North America and a market from which Canadian-owned companies could profit. It also hoped that they would invest those profits in Canadian productions: There has to be a healthy Canadian film cycle, with production, distribution, and exhibition actively inter-relating as they should. . . . To be healthy, Canadian distribution companies have to be able to do more than distribute Canadian films, which at present have less than 5% of the market. They have to be able to distribute more of the imported films in Canada. They have to be able to tap into the revenue potential of the Canadian market itself. There has to be a Canadian, as distinct from a North American, film market to aim at.44

In other words, the proposed legislation was intended to change the American film industry's practice of treating Canada as part of its domestic market and thereby create an opportunity for Canadian investors to profit from film marketing in Canada. In addition, the government hoped that some vertical relationships would develop between Canadian producers and distributors so that distributors would automatically invest their profits in production. MacDonald noted that "no fewer than seven Ministers since World War II have attempted, in the best Canadian tradition, to reach a negotiated agreement which would assure a Canadian presence on Canadian screens. None have succeeded."45 In sum, what was not accomplished by the "free" market forces in Canada was to be the goal of the proposed legislation. American majors' revenues in Canada had grown considerably during the 1980s. Of the estimated $322 million of Canadian box-office revenues in 1986, the majors controlled $150 million in rentals, or approximately 97 percent of the total rental revenues from the market. They also controlled an estimated 60 percent of the $170 million of the home-video market and $70 million of the ancillary markets (broadcast television, pay TV, and syndication).46 It was estimated by the National Association of Canadian Film and Video Distributors that MacDonald's proposed legislation would shift approximately 7 percent of those revenues to Canadian-owned distributors.47 The association predicted that twenty more feature films a year would be made in Canada as a result of this policy. Before we analyze the response from the United States to the pro266

Free Trade Anxieties

posed bill, let us look at Walt Disney's plans to expand operations in Canada and how they were received.

A Disney (Ad)Venture Walt Disney Productions filed a notification with Investment Canada on July 26, 1985, concerning its proposal to establish a subsidiary corporation in Toronto to produce and distribute motion pictures and television programs. Disney had marketed its products by way of a license agreement with Paramount's Canadian subsidiary until 1985. Certain important changes in the ownership of Disney and policies in production and marketing prompted the company to seek permission to do business directly in Canada. To prevent a hostile takeover of Walt Disney Productions, Roy E. Disney had brought in a group of new investors, Bass Brothers Enterprises from Texas, who were primarily engaged in oil and natural gas, real estate, and securities investment.48 They shook up the moribund studio by bringing in managerial talent from Paramount Films, principal among whom were Michael D. Eisner as chair and chief executive officer, Jeffrey Katzenberg as head of production and Richard Frank as president of Walt Disney Studios. This transfusion of new investment and talent resulted in more aggressive production and marketing of all Disney commodities, from movies to T-shirts. Touchstone Films, launched to make adult-oriented movies and to sufficiently distance itself from Disney's conservative image, which had a great deal of marketability, was put into high gear. As Canada was a key market for American films and television shows, Disney's new management decided to capitalize on it by marketing their films directly to Canadian theaters, video retailers, and television stations. While such internal changes to the company affected its global operations, certain changes in the Investment Canada Act, the law governing foreign investment, would become a roadblock. I have already noted that the Conservative government revised the Foreign Investment Review Act in 1985 (into the Investment Canada Act) to encourage foreign investment. The new act was to ensure that such investment contributed to economic growth and employment opportunities in the country and that significant investment proposals would be reviewed by the government to ensure such benefit to Canada.49 Acquisitions of control of Canadian businesses with gross assets 267

Canadian Dreams and American Control

of $5 million or more were reviewable under the act. Such acquisitions were not to be allowed unless a net benefit to Canada could be established. Acquisitions of control of Canadian businesses with gross assets of less than $5 million merely required a notice to be filed, unless the business involved an area related to Canada's cultural identity or heritage. In that case, the transactions could be reviewed at the option of the government of Canada. A new clause in the act insisted that foreign investment be compatible with national and provincial industrial, economic and cultural objectives.50 As we shall see, the government would decide to review the Disney application using that premise and the National Film and Video Policy of 1984. In its notification, Disney had projected an initial investment of $760,000 for the first three months of its operation in Canada which included the launching costs of $506,000 (prints and publicity) for The Journey of Natty Gann (1985).51 Disney pointed out that Canadian laboratories, warehouses, shipping companies, customs agents, various advertising outlets, and other service industries would benefit by its entry into the Canadian market. Disney also stated that Canada's independent theaters located in small towns would be better served by its subsidiary by claiming that it would be uneconomical to do the same from outside the country.52 Disney's representatives met with the officials of Investment Canada and the Ministry of Communications in Ottawa on August 1, 1985, to discuss the proposal. R. Hubbard, executive vice-president of Investment Canada, pointed out to Disney that the Canadian government had expressed concern over the "domination by U.S.-owned distribution companies of Canada's domestic theatrical market" and that in light of the Investment Canada Act, Disney might wish to address concerns of cultural sensitivity in writing.53 Hubbard indicated to Disney that their notification would be reviewed by Investment Canada and that a "more cooperative relationship can be mutually beneficial." The government tried diplomatically to convince Disney to go into a partnership with a Canadian-owned company. Disney, however, was unwilling to collaborate. Disney sought the help of the minister supervising Investment Canada by arguing that it had been a good corporate citizen. It pointed out that between 1981 and 1985, it had invested a total of approximately $25,560,300 (U.S.), in Canada producing three theatrical motion pictures, two movies for television, ten episodes for the Disney Channel, and a few short films. Additionally, several million dollars was spent in the production of home video, character merchandising, publications, and recorded music. Disney indicated that the Canadian 268

Free Trade Anxieties

pavilion at Epcot Center in Florida cost the company another $22 million, a subtle reminder that it was performing a public relations function for Canada at no cost to Canadians.54 Despite all these arguments, in terms of job creation, Disney's distribution company in Canada planned to hire a total of thirteen employees, twelve of whom would be residents, "provided Canadians with skills and compensation requirements satisfactory to Disney can be hired." The branch manager would be an American in the first year of its operation, and then a Canadian would assume that position.55 What Disney sought to do in Canada was to follow the model of a typical transnational corporation setting up a subsidiary, initially with managerial talent coming from its headquarters and local people carrying on minor tasks until they could be trained to manage on their own—at wages satisfactory to the parent company. This is certainly a far cry from a joint venture with a Canadian-owned company which the government sought through the Investment Canada Act. Disney took up this issue with the MPEAA and the U.S. government, which together opposed any limitations on U.S. business in Canada. The pending free trade issue came in handy in this process.

Power and Policy The proposed federal distribution bill, announced in February 1987, expectedly found powerful opponents within and outside the country as well as some not-so-powerful allies. Its future became embroiled in the ongoing free trade negotiations between the two countries. The U.S. film industry appeared split along the lines of majors and independents in its response to the proposed bill. Jonas Rosenfield, president of the American Film Marketing Association, an organization set up in 1980 to represent independent companies with national and foreign governments, wrote a letter to Flora MacDonald, sympathizing with Canada's "justifiable national ambition" to control its domestic market. The AFMA may have thought that any reallocation of distribution revenues in Canada might also benefit its members. Although originally organized as a "voice of the independent sector of the film industry," by 1987 the AFMA's membership included some majors such as MGM/UA and Orion Pictures and foreign institutions such as the Australian Film Commission and Telefilm Canada. Rosenneld's letter created a stir in the industry, and those majors who were members of 269

Canadian Dreams and American Control

the AFMA reportedly threatened to pull out of the organization.56 Rosenfield defended himself by stating, "All we said is that we sympathize with a legitimate national aspiration to have a separate market. We firmly believe in more competition."57 Because of the competing interests involved in the association, Rosenfield may have taken such a position. Whether or not the AFMA lobbied the U.S. government to support MacDonald's proposed bill is not known. Rosenfield declined to release the letter he sent to Flora MacDonald. Although the proposed bill would benefit all Canadian-owned distributors, the political position they took depended on their particular relationship with the American transnational. Independent distributors in English and French Canada generally supported the proposed bill. The thirty-five or so independent distributors operating in Canada included Norstar Releasing, Spectrafilm, Cinema International Canada, Malofilm Group, La Compaigne France Film, New World Mutual, Prima Film, Cinema Plus, Cinepix Inc., Distribution Alliance/ Vivafilm, Astral Bellevue Pathe, and PanCanadian. They were prominent nationally and regionally. Their lobbies supported the RaymondRoth report as well as the distribution bill.58 However, Astral president Harold Greenberg did not take any public stand on the issue, probably because his company handled shipping and servicing of prints for a few majors. PanCanadian, which is vertically integrated with Cineplex Odeon, would also benefit by the increased availability of films in the Canadian market, but its president, Garth Drabinsky, was strongly against the bill. The majors, individually and through the MPAA/MPEAA—their lobbyists—mounted an effective campaign against the proposed bill.59 Jack Valenti, MPEAA's president, and Millard Roth, head of its branch office in Toronto, met with Flora MacDonald in Ottawa. In an atmosphere that was reported as "cool," Valenti apparently suggested a tax at the box office to generate revenues for domestic filmmaking. MacDonald showed no enthusiasm for his suggestions and was believed to have lectured him.60 Valenti returned home to intensify his lobbying through some powerful allies in Washington. He believed that MacDonald's bill would not only reduce revenues for American companies but would also encourage other trading partners to follow Canada. Valenti took the issue to the highest levels of the U.S. government. He lobbied the president, various departments of the government, and the Senate, which had the power to ratify or reject the free trade agreement. He was reported to have met President Reagan at least twice to discuss this matter. The president personally brought up the issue of the 270

Free Trade Anxieties

film distribution bill with Prime Minister Mulroney at the annual economic summit on April 5, 1987. It was reported that Mulroney and his officials were taken aback when Reagan launched into a denunciation of MacDonald's bill and anxiously inquired whether Mulroney agreed with such plans. The Canadian prime minister apparently assured Reagan that the bill would in no way reduce Hollywood's freedom to do business in Canada.61 The U.S. House of Representatives and the Senate sent a letter, signed by fifty-four members, to Prime Minister Mulroney on June 2, 1987, expressing their "strongest objections" to the proposed distribution bill. Their letter pointed out that such cultural sovereignty measures would be seen as protectionist and indicated the trouble that lay ahead for the free trade agreement. "So, while the successful negotiation of a comprehensive free trade agreement will be difficult, its implementation by the Congress would be entirely inconsistent with the existence of the restrictive MacDonald Policy."62 Senator Allan Cranston of California, with support from five of his powerful colleagues, including Senator Lloyd Bentsen, head of the Senate Finance Committee which had the power to reject the free trade agreement before it was brought to the Senate floor, introduced a resolution expressing the sense of the Senate: Resolved by the Senate of the United States of America— (1) that proposals by the Government of Canada to impose discriminatory limitations on the ability of foreign companies to distribute motion pictures in Canada reflect a highly protectionist trade policy aimed primarily at U.S. motion picture distributors; and (2) such measures are totally at odds with concepts of free trade between nations and could result in an absolute bar to the successful completion of negotiations and Senate approval of a Free Trade Agreement between the U.S. and Canada.63

Support in the Senate for the resolution sent a clear signal to Canada that if it went ahead with the distribution bill, the Senate would not ratify the Free Trade Agreement. While Senator Cranston noted further the "disastrous impact" of MacDonald's bill on the U.S. film industry's revenues, Senator Pete Wilson observed that such a precedent might set off similar regulations affecting the whole service industry globally in which the United States still maintained a leadership position: Beyond the effect on United States-Canada trade, if the Canadian plan is implemented, it would play into the hands of those countries throughout 271

Canadian Dreams and American Control

the world which oppose expanded trade in services and investment— areas in which we are very competitive internationally. Indeed, it is ironic that developing countries have traditionally been opposed to expanded trade in these areas, yet one of our most economically advanced allies, Canada—with which we have the biggest per capita trade deficit—is the country leading the way toward protectionism. 64

The domino theory dies hard. The senators were attempting to protect not just the $1 billion contributed annually by the film industry to the U.S. balance of payments but the entire trade in services globally. Given the decay in its industrial sector and lack of investment dollars to rejuvenate it, the United States has staked out the services area— from motion pictures to computer software—for international trade. As it is still the undisputed leader in information technologies such as satellites which can overcome time and space barriers for movement of ideas and goods, the United States sees information-based services as a gold mine for expansion. According to George P. Shultz, the secretary of state, the cornerstone of U.S. policy in the "Age of Information" is open borders: Success in the information age depends on more than our own innovation and entrepreneurship. The new age also presents us all with a global challenge. New technologies circumvent the borders and geographical barriers that have always divided one people from another. Thus, the market for these technologies depends to a great extent on the openness of other countries to the free flow of information.65

Notwithstanding such idealistic expressions of the doctrine of free flow of information, the U.S. agenda for the 1990s is to pursue bilateral free trade agreements. It has also pressed hard for a new round of multilateral trade negotiations in the General Agreement on Tariffs and Trade (GATT) in Geneva. The U.S. agenda has found opposition from the Third World and some European countries over their fading national borders and the disadvantages of allowing the transnationals to control transborder flow of information.66 The motion picture industry is the only service sector to be included within the framework of both the GATT and the Organization of Economic Cooperation and Development (OECD). The theatrical feature film is considered in part a tangible product and in part a service, as its economic value lies in its rental income or earning power. As a tangible product, the feature film is subject to most GATT rules. Because it is a cultural commodity, the feature film is accorded special treatment under GATT. Article IV of GATT, "Special Provisions relat272

Free Trade Anxieties

ing to Cinematographic Film," acknowledges that government protection of a domestic film industry for cultural purposes is a legitimate social objective. At the insistence of various nations, which had already implemented film quotas, GATT provided that screen quotas be applied for that purpose. However, restrictions on distribution of films may be considered a violation of the GATT. Given the U.S. interest to ensure that countries do not erect trade barriers to American transnationals in the expanding services industry, any successful protective legislation in Canada could send the wrong signal. New industries that have grown since the signing of the GATT in 1947—television programs, recorded music, videocassettes, computer software—which are highly prone to piracy, are included in the ongoing negotiations in Geneva to rewrite GATT. It is specifically those new industries in which the United States has maintained a lead and placed much hope for its economic revival. If Canada were allowed to pass a restrictive law in the midst of such important GATT negotiations, they could be jeopardized completely. Much was at stake for the U.S.-based transnationals and the U.S. government. The American film industry had powerful allies in Canada as well. The men who headed corporate behemoths such as Cineplex Odeon, which are vertically integrated with American transnational, would benefit by an open trade policy with the United States. As noted earlier, Garth Drabinsky, Myron Gottlieb, and Charles Bronfman, who control a significant block of shares of Cineplex Odeon, constituted the trinity sitting atop that pyramid of power. Cineplex Odeon's 50 percent ownership tie with Universal Pictures and its relationship with the Bank of America placed it in a position of being an agent of international capital. What was best for the majors was best for Cineplex also. We may recall here that profits for Cineplex Odeon were entirely dependent on the regular supply of first-run feature films from the American majors. Cineplex Odeon went from the brink of collapse in 1983 to a large vertically integrated entertainment company with gross revenues of $500,615,000 in December 1986. Drabinsky and the other officers of Cineplex Odeon received millions of dollars in salary and stock options (see Chapter 7). It is not hard to imagine that they would oppose any policies intended to support unintegrated, Canadian-owned distributors, producers, and exhibitors that could potentially reduce their monopoly profits. While the proposed distribution bill could enhance the profitability of its distribution wing—PanCanadian—profits derived from the monopolistic supply arrangements with the majors were much more significant and considerably less risky. Besides, Cineplex 273

Canadian Dreams and American Control

Odeon's expansion into the U.S. theatrical markets and its proposed investments with MCA at Universal Studios in Florida could be jeopardized if the United States retaliated against Canadian investors. National capitalists who are rewarded for rendering their service to international capital can be found in different sectors of the Canadian economy. Let us take Drabinsky as such an archetype. In his speeches during Cineplex's troubled times, he was clearly opposed to foreign capital, but with present ties to MCA/Universal it is a different story altogether.67 Drabinsky switched his rhetoric in a matter of three years from nationalism to continentalism, from one of opposing foreign control over Canada's cultural industries to one of accommodation with foreign capital. He had denounced the recommendations of the Raymond-Roth report as "ill conceived" and the recommendation that the government pass legislation to ensure that distribution of films and video in all media in Canada be done by Canadian-owned companies as "most alarming" and "unethical."68 Speaking to the "Great Trade Debate" organized by the Canada California Chamber of Commerce in Los Angeles on February 4, 1987, Drabinsky acknowledged Canada's historic difficulty "to develop and maintain effective cultural policies in the face of overwhelming cultural and commercial pressure" from the United States. However, he went on to characterize Canadian concern over potential loss of sovereignty as "imaginary" and "irrational." He urged Americans at the meeting to pamper Canada in the cultural trade area, the cost of which would be "minuscule compared to everything at stake."69 Addressing the Trade Forum at the Toronto Festival of Festivals on September 12, 1987, Drabinsky attacked the proposed distribution bill as draconian because it targeted American film companies: "It is also clear that the American government will not sit idly by, given the significant lobbying clout of these companies, who are sure to demand either economic retaliation or the withdrawal of the legislation in consideration of concluding the broader free-trade agreement."70 Drabinsky made his position on the proposed bill clear in no uncertain terms. He wanted to see it killed: "The Canadian government, if it remains dedicated to reaching a settlement of all issues between the two countries, may simply have no alternative but to withdraw this piece of legislation." Drabinsky was clearly lobbying on behalf of the American transnationals. It was reported that he echoed Valenti's alternative to the distribution bill that Canada impose a box-office tax.71 He was putting his mouth where his company's interests were, which was not necessarily in the best interest of Canada. 274

Free Trade Anxieties

We might recall here that Drabinsky was following in the footsteps of his predecessors—the Allen Brothers, who built the first national theater chain before World War I, and, later in the 1920s, N. L. Nathanson, as president first of Famous Players and later of Odeon Theatres. As merchants of culture, they were simply interested in selling commodities and profiting from them. Producing films at home to support a national film culture was not their concern. Their integration with American producer-distributors was the key link to the structure of domination from the United States. It was the conduit through which profits from the Canadian markets flowed into American production. All the proposed bill attempted to do was to put a small dent in the structure without really altering it in any substantial way. Reaction to the bill from the European film producers and distributors from whom Canadian independent distributors traditionally bought films was also not helpful to the independents. At the 1987 Cannes International Film Festival, the biggest film bazaar held annually, European suppliers were reluctant to sell Canadian territory rights separately. According to Victor Loewy, president of Torontobased Alliance Releasing, "Goldcrest, Film Four and Gavin Films told us at the festival that they would not deal with Alliance or any other Canadian distributor for English-Canada. Vestron, which has no legal status yet in Canada, has 30—40 films now and they won't make a deal for English-language Canada because of the proposed legislation."72 The Europeans feared losing potential sales to the American market through the majors. They were also reported to be under pressure by Jack Valenti.73 Given all these forces of power expressing themselves in ways that suited their specific interests best, the proposed bill was stalled. With the title "An Act respecting the Importation into Canada of Film and Related Products," it was to be tabled in the House of Commons for first reading before the summer recess in 1986. Prime Minister Mulroney assured the industry that he would not buckle under to lobby pressure, but he did not table the bill as promised. By midwinter of 1988, it appeared that the bill was destined for the dust bins of history. The U.S. lobby—within and outside Canada—had accomplished its goal. A great deal was at stake for the Mulroney government. The distribution bill could paralyze the bigger economic plan to further continentalize the Candadian economy. The nationalist agenda on the cultural front, limited as it was, became entangled with the continentalist agenda. Unfettered trade in motion pictures between the United States and Canada has existed for nearly seventy-five years, and the implications 275

Canadian Dreams and American Control

for Canadian artists are all too familiar. We can imagine what it would be like if Canada agreed to withdraw various subsidies to arts, including production and marketing of feature films. It would put to rest once and for all the question of a nationally controlled cinema and television in Canada. There would be none! As Anthony Smith accurately observed, "No country in the world probably is more completely committed to the practice of free flow in its culture and no country is more completely its victim."74 This victimization, as we have seen, is not imposed on Canada unilaterally. Canada's national elites, through various corporate and state institutions, actively participate in the process and reproduce it. Despite the powerful U.S. threats to bring Canada to its knees, the imperial link could have been broken but for the fact that it has such powerful allies in Canada. The Canadian state, through its various apparatuses, arbitrates the powerful vested interests, often siding with one faction and then with another. In the long run, however, such mediation is an attempt to preserve capitalism itself and keeps intact the deeply entrenched international capital in Canada's political economy. National cultural autonomy is inevitably tied to those long-term institutional agendas. The Canadian filmmakers and others who have struggled for a long time to create an indigenous cinema in Canada need to revive their battle and articulate once again, as they did in the early 1970s, the necessity of making the kinds of movies and television programs they dream to make. The history of the Canadian feature film industry has clearly shown that as long as the Canadian vision to create a cinema is clouded by articulating it within the priorities of capital, the particular needs of Canadian filmmakers will never be met. Besides, such limited national cultural development only strengthens the imperial link with monopoly capital.

276

Appendix of Tables Statistical Summary of the Canadian Feature Film Industry, 1976

Revenues from theatrical features ($) Staff (full-time) Average revenue per employee ($) Number of theaters/companies Average employment per theater/company

Exhibition

Distribution

Production

224,035,000 8,234

78,585,000 656

12,000,000 868

27,209 1,438

119,799 86

13,825 246

6

8

4

Source: Statistics Canada 1976 Advance; and Statistics, Canada Catalogue 63-206— Table 3, as quoted in Canadian Motion Picture Distributors Association, Submission to the Federal Department of Finance, July 1978. Note: $52 million of film rental revenue from theatrical distribution was controlled by the foreign-owned U.S. majors in 1976. That meant approximately 67 percent of the rental revenue accrued to the majors that year.

277

20 Canadian Films with High Gross Rentals in the U.S. Market (as of May 4, 1983)

Porky's Meatballs Quest for Fire Heavy Metal Visiting Hours Middle Age Crazy Prom Night Scanners If You Could See What I Hear Incubus The Changeling Atlantic City Happy Birthday to Me Running Tribute High-Ballin' The Amateur Terror Train Murder by Decree The Apprenticeship ofDuddy Kravitz

Source: Variety, March 4, 1983, p. 460.

Year

Distributor

Gross Rental

1982 1979 1982 1981 1982 1980 1980 1981 1982 1982 1980 1981 1981 1979 1980 1978 1982 1980 1979 1974

Twentieth Century-Fox Paramount Twentieth Century—Fox Columbia Twentieth Century—Fox Twentieth Century—Fox Embassy New World Jensen Farley Fox Video American Film Distributors Paramount Columbia Universal Twentieth Century-Fox American International Pictures Twentieth Century-Fox Twentieth Century—Fox Avco Embassy Paramount

$53,500,000 21,200,000 12,200,000 10,325,000 6,500,000 6,000,000 6,000,000 6,000,000 5,640,920 5,506,567 5,300,000 5,000,000 4,981,000 4,092,000 4,008,000 4,000,000 4,000,000 3,500,000 3,100,000 2,700,000

Comparison of Top 15 Export Theatrical Film Markets For U.S. Major Distributors, 1985-1986 1986 Rank

Country

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Japan France Canada W. Germany Italy U.K., Ireland Spain Australia Brazil Sweden Netherlands Switzerland Belgium Mexico Taiwan

TOTAL, TOP 15 MARKETS GRAND TOTAL, FOREIGN MARKETS TOTAL, UNITED STATES TOTAL, WORLD RENTAL

Percentage change ($)

Percentage change (Local)

102.6 98.5 86.8 64.7 64.6 49.1 48.2 27.4 24.5 17.1 14.7 13.9 13.8 13.5 12.5

+27 +49 + 13 + 25 +52 + 16 +49 -5 + 80 +24 + 75 +47 +63 -20 +37

-10 + 15 + 15 -8 + 19 +2 +23 0

651.8 798.3 1,165.1 1,963.4

+ 30 +29 + 5 + 14

Rentals ($ millions)

Source: Motion Picture Export Association of America, as quoted in Variety, June 17, 1987, p. 36. a

Local currency changed, comparison inapplicable.

a

+3 + 29 +7 + 22 +92 + 30

1985 Rank 1 3 2 4 6 5 7 8 11 10 15 12 14 9 13

Majors' Share of U.S.-Canada Theatrical Film Rental Market, 1970-1987

1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 1975 1974 1973 1972 1971 1970

Columbia

Fox

MGM/UA

Paramount

Universal

Warner Brothers

Disney

Orion

Tri-Star

4% 9 10 16 14 10 13 14 11 11 12 8 13 7 7 9 10 14

9% 8 11 10 21 14 13 16 9 13 20 13 14 11 19 9 12 19

4% 4 9 7 10 11 9 7 15 11 18 16 11 9 11 15 7 9

20% 22 10 21 14 14 15 16 15 24 10 10 11 10 9 22 17 12

8% 9 16 8 13 30 14 20 15 17 12 13 25 19 10 5 5 13

13% 12 18 19 17 10 18 14 20 13 14 18 9 23 16 18 9 5

14% 10 3 4 3 4 3 4 4 5 6 7 6 7 7 5 8 9

10% 7 5 5 4 1 — 2 5 4 4 5 5 4 3 3 3 3

5% 7 10 5

— — — — — — — — — — — — — —

Source: A. D. Murphy, "Par Top '87 Domestic Distrib: Generates Nearly 20% of U.S. and Canadian Rentals; BV, Warners Next in Line," Variety, January 20, 1988, p. 4. Notes: Percentages do not add to 100; remaining rental revenue is the share of independents or smaller companies. Tri-Star began operations in 1984 and was absorbed by Columbia Pictures in late 1987.

Notes Introduction 1. For a thorough analysis of this process of ideological incorporation by the hegemonic power and the role of the Canadian state, see Dallas W. Smythe, Dependency Road: Communications, Capitalism, Consciousness, and Canada (Norwood, N.J.: Ablex, 1981). 2. It is estimated that nationally produced films occupy 20 percent of screen time in Australia, 26 percent in Britain, 44 percent in Italy, and 48 percent in France. See Department of Communications, Vital Links: Canadian Cultural Industries (Ottawa: Minister of Supply and Services, 1987), p. 43. 3. Ibid., p. 21. 4. "The Weekend Poll," Weekend Magazine, August 19, 1978, p. 3. 5. Statistics Canada, Annual, 63-207, 1977, p. 22. 6. Ibid. 7. Department of Communications, Vital Links, p. 43. 8. Humphrey McQueen, Australia's Media Monopolies (Camberwell, Victoria: Widescope, 1977), p. 3. 9. See, for instance, Kari Levitt, Silent Surrender: The American Economic Empire in Canada (New York: Liveright, 1970). 10. Canada Today/D'Aujour d'hui, Vol. 1 (Washington, D.C.: Canadian Embassy, 1982), p. 2. 11. Ibid., p. 7. 12. Ibid., p. 6. 13. Ibid., p. 4. 14. Quoted in TV Guide, November 7, 1981, p. 32. 15. For a good case study of the combined influence of finance capitalists and the American government on Canada's banking industry policies in the 1960s, see Peter C. Newman, The Distemper of Our Times (Toronto: McClelland and Stewart, 1968). 16. Instead of arguing an either/or position between instrumentalist and structuralist conceptions of the state, I have posited that these may be complementary processes. Frequently the state may protect the interests of the ruling classes and settle the often conflicting demands of indigenous capital and foreign capital as

281

Notes to Introduction

17.

18.

19. 20.

21. 22. 23. 24.

25.

26. 27.

28.

29. 30. 31. 32.

282

well as various sections of indigenous capital. Thomas Guback has put forth this position in reference to the U.S. film industry in a recent article, "Shaping the Film Business in Postwar Germany: The Role of the U.S. Film Industry and the U.S. State," in Paul Kerr, ed., The Hollywood Film Industry (London: BFI and Routledge & Kegan Paul, 1987), pp. 246-48. For a case study, see Manjunath Pendakur, "United States-Canada Relations: Cultural Dependence and Conflict," in Vincent Mosco and Janet Wasko, eds., The Critical Communications Review: Changing Patterns of Communications Control (Norwood, N.J.: Ablex, 1984), Vol. 2, pp. 165-84. D. Leyton-Brown, "The Multinational Enterprise and Conflict in CanadianAmerican Relations," in A. B. Fox et al., eds., Canada and the United States: Transnational and Transgovernmental Relations (New York: Columbia University Press, 1976), pp. 141-161. Quoted in Desmond Smith, "Culture and the Entrepreneur," In Search/En quete, Vol. 8, no. 3, 1981, p. 28. See Royal Commission on Broadcasting, Report (Ottawa, 1929); Royal Commission on Broadcasting, Report (Ottawa, 1957); Royal Commission on Publications, Report (Ottawa, 1961); Royal Commission on National Development in the Arts, Letters, and Sciences, Report (Ottawa, 1965); Special Senate Committee on Mass Media Report, Vols. 1, 2, 3 (Ottawa, 1970); Government of Canada, Department of Communications, Federal Cultural Policy Review Committee, Report (Ottawa, 1982). Royal Commission on Broadcasting, 1957. Emily S. Rosenberg, Spreading the American Dream: American Economic and Cultural Expansion, 1890-1945 (New York: Hill and Wang, 1982), pp. 79-86. U.S. Department of State, "Freedom of the Press—Worldwide," Bulletin 14, February 3, 1946, p. 160. Dallas W Smythe has developed this consciousness industry concept, which crystallizes the economic and ideological facets of cultural commodities and the audience participation in consuming and living through them in monopoly capitalism. See note 1, above. For a pioneering study of the global preeminence of the vertically integrated transnational enterprises of the American film industry, see Thomas H. Guback, The International Film Industry: Western Europe and America since 1945 (Bloomington, Ind.: Indiana University Press, 1969). C. J. North, "Our Foreign Trade in Motion Pictures," Annals of the Academy of Political and Social Sciences 128 (November 1926): 102. For an analysis of how complementary the economic and ideological interests of the U.S. government and the U.S. film industry were in the post-World War II period, see Guback, "Shaping the Film Business." Quoted in Felix Greene, The Enemy: What Every American Should Know about Imperialism (New York: Vintage Books, 1971), p. 105. The 1890s were characterized by the dramatic American expansion of formal and informal colonies. Formal colonies were Puerto Rico, the Philippines, Hawaii, and Guam; informal colonies included Cuba and a whole range of Central American and Caribbean nations. This argument was developed by Herbert I. Schiller in Communications and Cultural Domination (White Plains, N.Y.: International Arts and Sciences Press, 1976). Quoted in ibid., p. 29. Ibid., p. 8. Ibid., p. 9.

Notes to Chapter 1 33. Quoted in Guback, "Shaping the Film Business," p. 9. 34. See Manjunath Pendakur, "The New International Information Order after the MacBride Commission Report: An International Powerplay between the Core and the Periphery Countries," Media, Culture and Society, vol. 5, nos. 3 & 4, 1983, pp. 395-4J2. See also Many Voices, One World (Paris: UNESCO, 1980). 35. For a description of the political economy of communications from a Marxist perspective, see Smythe, Dependency Road; Graham Murdock and Peter Golding, "For a Political Economy of Mass Communications," in R. Milliband and J. Saville, eds., The Socialist Register 1973, pp. 205-34; Paresh Chattopadhyay, "Political Economy: What's in a Name?" Monthly Review, April 1974, pp. 23—33; Maurice Zeitlin, "Corporate Ownership and Control: The Large Corporation and the Capitalist Class," American Journal of Sociology 79, no. 5, March 1974, pp. 1073-1119. Good examples of non-Marxian political economy applied to communications are Robert E. Babe, Canadian Television Broadcasting: Structure, Performance and Regulation (Ottawa: Ministry of Supply and Services, 1979); and Ben H. Bagdikian, The Media Monopoly (Boston: Beacon Press, 1983), 1987. 36. Willard F. Mueller, A Primer on Monopoly and Competition (New York: Random House, 1970), p. 12. 37. Paul A. Samuelson, Economics, 9th ed. (New York: McGraw-Hill, 1973), p. 510. 38. Joan Robinson, The Theory of Imperfect Competition (London: Macmillan, 1933); Edward H. Chamberlin, The Theory of Monopolistic Competition (Cambridge, Mass.: Harvard University Press, 1933). 39. John Kenneth Galbraith, "Power and the Useful Economist," American Economic Review 63, no. 1 (March 1973): 6. 40. Ibid., p. 4. 41. Ibid., p. 5. 42. Ibid., p. 6. 43. Peter Morris, Embattled Shadows: A History of Canadian Cinema, 1895—1939 (Kingston, Ont.: McGill-Queen's University Press, 1978); The Film Industry in Canada: Report (Ottawa: Secretary of State, 1977); Paul Audley, Canada's Cultural Industries: Broadcasting, Publishing, Records and Film (Toronto: James Lorimar, 1983).

Chapter 1 1. For an interesting historical account of early exhibitors in Canada, see Hilary Russell, "All That Glitters: A Memorial to Ottawa's Capitol Theatre and Its Predecessors," Canadian Historical Sites: Occasional Papers in Archeology and History, no. 13 (Ottawa: Parks Canada, National Parks and Sites Branch, 1975), pp. 10-12. 2. Peter Morris, Embattled Shadows: A History of Canadian Cinema, 1895—1939 (Kingston, Ont.: McGill-Queen's University Press, 1978), pp. 3-5. 3. Thomas Tally was one of the principals who, in 1917, organized the First National Exhibitors Circuit—a combination of first-run theater owners in key cities of the United States. They later went into distribution and production of feature films. Such vertical integration started the trend of consolidation of production, distribution, and exhibition of motion pictures. From the production end, Adolph Zukor organized such a vertical structure, which affected Canada. See Benjamin B.

283

Notes to Chapter 1

4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29.

30. 31.

32. 33. 34.

35.

284

Hampton, History of the American Film Industry from Its Beginnings to 1931 (New York: Dover, 1970), pp. 170-96, 252-80. Morris, Embattled Shadows, pp. 19-20. Russell, "All That Glitters," p. 21. Ibid., pp. 23-25. Morris, Embattled Shadows, p. 26. Mae D. Huettig, Economic Control of the Motion Picture Industry: A Study in Industrial Organization (Philadelphia: University of Pennsylvania Press, 1944), pp. 14-31. Morris, Embattled Shadows, p. 42. Ibid., pp. 47-56. David Street, "The Invaders: Canada's Hollywood Hit Squad," The Canadian, June 24, 1978, pp. 3-7. Morris, Embattled Shadows, p. 25. Reprinted in ibid., p. 55. Ibid., p. 63. Ibid., p. 64. Ibid., p. 64 Ibid., p. 110. Kirwan Cox, "The Rise and Fall of the Aliens," mimeo, n.d., pp. 2—3. Morris, Embattled Shadows, p. 22. Cox, "The Rise and Fall," p. 4. See Hampton, History of the American Film Industry, pp. 64—169; Huettig, Economic Control, pp. 14-24. Cox, "The Rise and Fall," p. 5. Huettig, Economic Control, p. 79. Cox, "The Rise and Fall," p. 7. Ibid., p. 9. Reprinted in ibid., p. 8. Morris, Embattled Shadows, p. 60. Canadian Moving Picture Digest, May 3, 1919, p. 1. Paramount's tactics to dominate the film industry at this time included monopolization of the most desirable star commodities such as Mary Pickford, John Barrymore, and James Hackett and instituting block booking of pictures. See Huettig, Economic Control, pp. 30-32. Cox, "The Rise and Fall," p. 11. The principal supporters of this venture were a major investment firm, Kuhn, Loeb and Company, and associate bankers, who raised $10 million in a preferred stock issue of Famous Players—Lasky Corporation. The successful sale of this stock would assist further consolidation in the U.S. film industry. Zukor acquired 303 theaters between 1919 and 1921. See Hampton, History of the American Film Industry, p. 243; see also Huettig, Economic Control, pp. 34—36. Cox, "The Rise and Fall," p. 15. Nathanson was reported to have been negotiating with Zukor in New York during this critical period. See Canadian Moving Picture Digest, May 3, 1919, p. 4. It is not certain whether the Regent Theatre Company was renamed as Famous Players Canadian Corporation Limited. See "Canadian Cablesystems Limited," February 17, 1978, p. 2. Canada, Department of Labour, Investigation into an Alleged Combine in the Motion Picture Industry in Canada, Report of Commissioner, April 30, 1931 (hereafter re-

Notes to Chapter 1

36.

37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50.

51. 52. 53. 54. 55. 56. 57. 58. 59.

ferred to as the White Report). This report, by Commissioner White, is an excellent source of detailed information on the companies and their operations between 1920 and 1930. In addition to the economic problems in the British film industry, there were some ideological considerations as well for legislating the Cinematograph Films Act of 1927. The Imperial Conference held in October 1926, which was attended by comprador elements from Canada, Australia, New Zealand, and other outreaches of the empire and its dependencies, attached great importance to the need for expanded British film production to counter the American influence through films. A sentiment popular in Britain and Canada at the time was that film could be effective in projecting an ideal British image throughout the world, particularly in the colonies, many of which were engaged in popular as well as armed struggle against British rule. The conference suggested a number of measures by which the colonial governments could assist the empire by legislating preferred entry for British films, quotas, and customs duties on other imported films. See Rachel Low, The History of the British Film, 1918-1929 (London: George Allen & Unwin, 1971), p. 95. Jeremy Tunstall, The Media Are American: Anglo-American Media in the World (London: Constable, 1977), p. 284. Cox, "The Rise and Fall," p. 17. Ibid. Quoted in ibid., p. 18. Ibid., p. 19. White Report, p. 17. "Canadian Cablesystems Limited," February 17, 1978, p. 3. See also White Report, p. 16. Reprinted in White Report, p. 16. Ibid., p. 75. Cox, "The Rise and Fall," p. 19. Ibid. Ibid., p. 20. Ibid., p. 21. In his interesting account of the circumstances that precipitated the sale of Allen Theatres Circuit, Kirwan Cox states that thirty-five theaters were sold for the low price of $650,000, while the White Report lists only twenty theaters as having been sold. I have taken the White report to be accurate because it was based on testimony presented at a judicial hearing (p. 54). White Report, p. 20. Ibid., p. 21. The Bryce Commission Papers, Submission of Famous Players Limited, April 1976, P-6. William Marston Seabury, The Public and the Motion Picture Industry (New York: Macmillan, 1926), p. 29. White report, p. 19. Ibid., pp. 18-19. Ibid., pp. 72-77. "Paramount Company" here refers to B.C. Paramount Theatres Ltd. See ibid., p. 39. Ibid., pp. 41-42.

285

Notes to Chapter 2 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72.

73. 74. 75. 76. 77. 78. 79. 80. 81.

82. 83. 84. 85. 86.

Ibid., p. 43. Ibid., p. 44. Ibid., pp. 12-13. Ibid., p. 14. Ibid., pp. 105-6. Ibid., p. 73. Ibid., p. 72. Ibid., p. 105. Edward C. Raftery, "Memorandum to O'Brien re: Canadian Combines Investigation," March 20, 1931, United Artists Papers, State Historical Society, Madison, Wis., p. 4. Reprinted in White Report, p. 191. Ibid., pp. 191-92. Ibid., p. 192. Ibid., p. 191. "Protection" meant that the distributor agreed not to lease a given picture to an independent theater located in the vicinity of a Famous Players theater during the course of the film's first run and thereafter for a certain period of time. Reprinted in ibid., p. 192. Ibid. Ibid., pp. 213-14. Correspondence between A. Lauriente and J. Plottel, Vitagraph's branch manager in Vancouver and Canadian sales manager in Toronto. See United Artists Papers, State Historical Society, Madison, Wis. United Artists Papers, telegram, Lauriente to Warner Bros. Pictures, Inc., October 30, 1929. Letter to Lauriente by Vitagraph Branch Manager, Vancouver, September 30, 1929; Letter by Vitagraph Branch Manager, Vancouver, to the Home Office, October 8, 1929. In United Artists Papers, State Historical Society, Madison, Wis. Reprinted in White Report, p. 218. Ibid., p. 154. United Artists was a company that represented several stars in the United States who made their own pictures. Most of the stars insisted on having contracts independently of the others, so that pictures sold in block by United Artists would be of one artist and not the whole of the pictures they distributed or a block of the total distribution. See White Report, p. 155. Ibid., p. 155. Ibid. Ibid., pp. 152-53. Reprinted in ibid., p. 153. Reprinted in ibid., p. 155.

Chapter 2 1. White Report, p. 28. 2. Ray Moley, The Hays Office (Indianapolis: Bobbs-Merrill, 1945), p. 171.

286

Notes to Chapter 2 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18.

19. 20. 21. 22. 23.

24. 25.

26. 27.

White Report, pp. 163-64. Ibid., p. 30. Ibid. Bragg and Cohen were both associated with Famous Players. Ibid., p. 21.. Ibid. Ibid. Ibid., p. 212. Morris, Embattled Shadows, p. 181. White Report, p. 212. Ibid. Political and Economic Planning, The British Film Industry, A Report London, May 1952, p. 44. White Report, p. 159. Commissioner White noted in his report that the word Canadian in this message was a typographical error and it should read British. Ibid. Ibid, p. 160. Haskell Masters to E. Raftery, March 21, 1931, United Artists Papers, State Historical Society, Madison, Wis. John Cooper, Memorandum for General Managers No. 36, re: Copyright, The Motion Picture Exhibitors and Distributors of Canada, June 1, 1931, United Artists Papers, State Historical Society, Madison, Wis. White Report, p. 166. Ibid., pp. 163, 181. Ibid., p. 164. See Raftery, Memorandum to O'Brien, p. 5. United States v. Paramount Famous-Lasky Corporation et al., 34 F. 2d 984 (S.D.N.Y., 1929); United States v. First National Pictures Inc., et al, 34 F. 2d 815 (S.D.N.Y, 1929). In Michael Conant, Antitrust in the Motion Picture Industry: Economic and Legal Analysis (Berkeley: University of California Press, 1960), p. 28. White Report, p. 210. The specific case was Paramount Famous—Lasky Corporation v. United States, 282 U.S. 30 (1930), in ibid., p. 28. Zukor's attempt to have some control over the potential competition from radio was a costly venture for Paramount. William Paley and his associates of CBS had traded 50 percent of their interest for 58,823 shares of Paramount Publix Corporation. They were worth about $3.8 million. A buyback clause in the contract had provided Zukor with the opportunity to acquire the Paley group's interest in Paramount for a total of $5 million, if CBS earned a total of $2 million in the ensuing two years. They proved decisive years for both parties, as Paramount's stock crashed along with the American economy in 1929 and Paley's network had made a profit of $3 million. The cash-short Paramount could not meet its obligation, thereby making Paley's group richer by $4 million. See Robert Metz, CBS: Reflections in a Bloodshot Eye (New York: New American Library, 1975), pp. 24—25. Moody's Manual of Investments, Paramount Publix Corporation, 1930, pp. 1937-38. Benjamin Hampton has noted about Paramount: "Zukor had made Paramount an organization comparing favorably with the principal Standard Oil companies, General Electric, United States Steel and other premier industrial corporations." He points out that "an immeasurable, invisible world power rested on the desk of Emperor of Entertainment in the lofty Paramount Building in Times Square." Hampton, History of the American Film Industry, pp. 409, 363.

287

Notes to Chapter 3 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39.

40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51.

Moody's Manual, p. 1938. White Report, p. 16. Ibid., p. 223. Raftery, Memorandum to O'Brien, p. 6. See, for example, "Nathanson Blames Killam for Plight of the Film Firm," Toronto Daily Star, July 10, 1931. Raftery, Memornadum to O'Brien, pp. 1—2. Ibid., p. 2. White Report, p. 233. D. W. E. Partridge, senior commerce officer, Consumer and Corporate Affairs Canada, Telephone interview, December 28, 1979. Rex v. Famous Players (1932), Ontario Reports, 307, p. 340. Ibid., p. 342. These features of the Combines Investigation Act are applicable even today according to a government document. See Canada, Bureau of Competition Policy, Department of Consumer and Corporate Affairs, Application of the Combines Investigation Act to Services, April 1976. See also, D. H. W. Henry, "The Combines Investigation Act and the Mass Media," Osgood Hall Law Journal, Vol. 8, no. 1 (1970). Bureau of Competition Policy, Application of the Combines Investigation Act, p. 2. Bert Young, "Corporate Interests and the State: Anti-Combine Activity in Canada— 1900 to 1970," Our Generation, Vol. 10, no. 1, 1974, p. 74. Ibid., p. 71. Ibid., p. 72. Ibid., p. 71. Ibid. H. S. Ferns and B. Ostry, The Age of MacKenzie King: The Rise of the Leader (London: William Heinmann; Toronto: British Book Service, 1955), p. 103. Ibid., p. 104. Young, "Corporate Interests," p. 71. J. A. Lower, A Nation Developing: A Brief History of Canada (Toronto: Ryerson Press, 1970), p. 180. Ibid. Richard Howard, Jacques Lacoursierre, and Claude Bouchard, A New History of Canada: A Time of Shocks, 1926-1939 (Montreal: Editions Format, 1973), p. 940.

Chapter 3 1. My source of information on this historical period is mainly Kirwan Cox's unpublished research outline used in the preparation of a Canadian Broadcasting Corporation television program series entitled "The Great Canadian Culture Hunt Series," aired in 1976. Hereafter referred to as Exhibition and Distribution Research Outline. 2. The intriguing story of William Fox's battles with AT&T and the major bankers who assisted corporate raiders to pillage that company for gain is interestingly told in Upton B. Sinclair, Upton Sinclair Presents William Fox (Los Angeles: published by author, 1933; reprint New York: Arno Press and New York Times, 1970).

288

Notes to Chapter 3 3. Kirwan Cox, "The Indies vs. the Chains: Canada's Theatrical Wars," Cinema Canada (June-July 1979): 49. 4. Odeon was incorporated on April 18, 1941, according to its annual returns filed with Consumer and Corporate Affairs Canada. Also see Odeon's 25 Eventful years in Canada: A Special Supplement Saluting a Leading Theatre Company 1941—1966, Odeon Theatres (Canada) Limited, April 13, 1966, p. 13. 5. Barron sold his equity to Odeon in 1969, Friedman sold in 1973, and Morton was negotiating the sale in 1980. C. R. B. Salmon, president, Canadian Odeon Theatres, interview, Toronto, May 29, 1980. 6. "Odeon's 25 Eventful Years," p. 13. 7. Cox, Exhibition and Distribution Research Outline, p. 20. 8. Salmon interview. 9. Cox, Exhibition and Distribution Research Outline, p. 21. 10. Quoted in ibid. In a telephone interview on November 10, 1978, George Destounis confirmed the statement but insisted that Canadian films have been played in Famous Players theaters. The question of access to theaters for Canadian films is examined in Chapter 5. 11. The film industry was not the sole concern of the Royal Commission on Corporate Concentration, which was appointed by the government on May 1, 1975, to inquire into, report on, and recommend policy concerning concentration and corporate power in Canada. The Council of Canadian Film Makers (CCFM) representing eight thousand members of different industry associations made an intervention at a hearing on April 27, 1976, in Toronto. Following that, the commission sent the CCFM brief to the two national circuits and the Canadian Motion Distributors Association, a branch of the Motion Picture Export Association of America, for their response. Famous Players, Odeon, and the CMPDA filed briefs with the commission which were made public by the CCFM (along with its rebuttal) as they contained hitherto unavailable data on the Canadian film industry. George P. Destounis, president, Famous Players Limited "Submission of Famous Players Limited to the Royal Commission on Corporate Concentration," in Bryce Commission Papers, Toronto, April 27, 1976, p. 6. (Hereafter referred to as Bryce Commission Papers.) 12. Cox, Exhibition and Distribution Research Outline, pp. 4—6. 13. Quoted in Ibid., p. 25. 14. Quoted in ibid., p. 27. 15. Ibid. 16. Ibid., p. 28. 17. Ibid. 18. Ibid., p. 29. 19. "Odeon's 25 Eventful Years," p. 44. 20. Film World, December 1977, p. 12. 21. Salmon interview, November 15, 1978. 22. Ibid. 23. Salmon interview, May 29, 1980. 24. Political and Economic Planning, The British Film Industry: A Report, London, May 1952, p. 97. 25. By 1975, the Rank Organization's films contributed only 5 percent of Odeon's total annual film revenues. See letter written by H. T. Blumson, Odeon Theatres (Canada)

289

Notes to Chapter 3

26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37.

38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55.

290

Limited, to Serge Bourque, executive secretary, Royal Commission on Corporate Concentration, March 31, 1976, p. 2, in Bryce Commission Papers. Statistics Canada, Annual 63-207, 1972, p. 9. Destounis, in Bryce Commission Papers, p. 6. Salmon, Interview, November 15, 1978. Destounis, in Bryce Commission Papers, p. 7. Quoted in Cox, Exhibition and Distribution Research Outline, p. 56. Destounis, in Bryce Commission Papers, p. 8. "Canadian Cablesystems Limited," Financial Post Corporation Service, February 17, 1978. Hollywood Reporter, August 25, 1981, p. 8. Film World, December 1977, p. 12. Ibid. Statistics Canada, Annual 63-207, 1977; and Bryce Commission Papers. See also Film World, December 1977, p. 12. These figures represent numbers of theaters and not screens, which would be higher. Canadian Film Digest publishes those data, but they are not used here, because Famous Players and Odeon have various partnerships with some independent theater operators. The information was not available to me from the Digest or the companies. The submissions made by the two chains to the Bryce Commission did not spell out details. As a result, I have relied on the data made available by the circuits themselves. Data for other years were not available in the public domain, and the circuits declined to answer my request for them. Canadian Cablesystems Limited, Annual Report, 1978. Canadian Cabelsystems Limited, Annual Reports, 1972-78. Canadian Cablesystems Limited, Annual Report, 1978. Destounis, in Bryce Commission Papers, p. 12. Ibid., p. 13. Ibid., Exhibit D, pp. 1-3. Ibid. For 1971, see Odeon Theatres (Canada) Limited, Auditor's Report, October 31, 1972; for 1975, see Odeon Theatres (Canada) Limited, Auditor's Report, October 31, 1975. These were filed with Consumer and Corporate Affairs Canada. H. T. Blumson, president, Odeon Theatres (Canada) Limited, in Bryce Commission Papers, April 1976, p. 2. Ibid. Ibid. Salmon interview, November 15, 1978. Ibid. Ibid. "Disney to Paramount," Cinemag, no. 15, March 1979, p. 2. "Case settles For No-Bid," Cinemag, no. 14, February 19, 1979, p. 5. There have been several such instances of product splitting in the U.S. market, mainly as a result of exorbitant rental terms, advances/ guarantees, and so on, that are demanded by the majors for their high-budget pictures. For one such case, in which four exhibitors in the Milwaukee market were convicted of conspiracy in restraint of trade in a civil antitrust action, see United States of America v. Capitol

Notes to Chapter 3

56.

57. 58. 59. 60. 61. 62. 63. 64. 65. 66.

67.

68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78.

Service, Inc., Kohlberg Theatres Service Corporation, Marcus Theatres Corporation, and United Artists Theatre Circuit, Inc., case no. 80-C-407, June 16, 1983. Salmon, interview, May 29, 1980. Also Victor Beattie, general manager, Twentieth century-Fox in Canada, confirmed his company's split arrangement with Famous Players and Odeon. See In the matter of a complaint pursuant to the Theatres and Amusement Act, Revised Statutes of Nova Scotia 1967: Between Rocca Cinemas Limited, Complainant, and Astral Films Limited, Bellevue Film Distributors, Limited, Paramount Pictures Corporation (Canada) Limited, 20th Century—Fox Film Corporation, United Artists Corporation, Universal Films, a Division of MCA Canada Ltd., Warner Bros. Distributing (Canada) Limited, Respondents. Hearings, May 17, 1976, pp. 1535—36. (Hereafter referred to as the Rocca Hearings.) Salmon, interview, November 15, 1978. Statistics Canada, Annual 63-207, 1977, p. 20. Ibid. Motion Picture Export Association of America statistics as reported in Variety, August 2, 1978. Variety, June 17, 1987, p. 36. Council of Canadian Film Makers, "Brief Submitted to the Royal Commission on Corporate Concentration," February 20, 1976, in Bryce Commission Papers. Destounis, in Bryce Commission Papers. U.S. Securities and Exchange Commission, Form 10-K submitted by Paramount Pictures parent company, Gulf & Western Industries, Inc., July 31, 1978, p. 5. Statistics Canada, Annual 63-207. 1977. This act was passed on April 15, 1939, by the Nova Scotia government after a complaint by an independent exhibitor to regulate the supply of first-run films and curb the power of the American majors and their affiliated theater circuits in that province. The act was never promulgated, however, because of successful lobbying on the part of the U.S. film industry in Canada. See Cox, Exhibition and Distribution Research Outline, pp. 6—7. The act was revised in 1967, but its historical circumstances are not known to me. Rocca Cinemas Limited v. Bellevue Film Distributors Ltd., Astral Films Ltd., Paramount Film Service Ltd., United Artists Corporation, Warner Bros. Distribution Ltd., Universal Films (Canada), Twentieth Century-Fox Film Corporation, Report of the Inquiry Officer, Amusements Regulation Board, Halifax, April 14, 1978, p. 59. (Hereafter referred to as the Kimball Report.) Ibid., p. 15. Ibid., p. 14. Ibid., pp. 52-53. See cross-examination of Irving Stern, general manager of Warner Bros. Canada, Rocca Hearings, pp. 1138-40. Kimball Report, p. 53. Kimball Report, p. 57. Ibid., p. 58. Ibid. Globe and Mail, June 10, 1977. Her Majesty the Queen v. Columbia Pictures Industries Incorporated, Provincial Court (Criminal Division), Judicial District of York, Toronto, June 9, 1977, pp. 5—6. "Judgement," ibid., p. 5.

291

Notes to Chapter 4 79. Her Majesty the Queen v. Columbia Pictures Industries, Inc., Supreme Court of Ontario (Court of Appeal), Appellant's Statement, August 8, 1978, pp. 4-5. 80. Variety, September 13, 1978, p. 4. 81. Her Majesty the Queen v. United Artists Corporation, Order of Prohibition, May 18, 1979. 82. Letter written by Mike Bragor, Bellevue Distributors Limited, Toronto, to all its branches in Canada, March 12, 1976; see also letter by V. B. Winchester, manager of Bellevue Distributors, to T. Murray Lynch, Famous Players, Halifax district office, March 14, 1974. 83. Her Majesty the Queen v. Bellevue Film Distributors Limited, Order of Prohibition, May 19, 1979.

Chapter 4 1. Quoted in "ACTRA's Reaction," Canadian Film Digest, 1976, p. 102. 2. Quoted in Morris, Embattled Shadows, p. 181. 3. Gary Evans,/0/m Grierson and the National Film Board: The Politics of Wartime Propaganda 1939-1945 (Toronto: University of Toronto Press, 1984). 4. By 1945, the NFB had become the prime force in Canadian film production. Its staff of almost 800 people made 250 films that year. NFB series—Canada Carries On and World in Action—were being screened in movie theaters across the country. The NFB created circuits that did not exist before, where itinerant projectionists covered various communities with a program of films every month. They reached approximately 250,000 Canadians in rural areas, 300,000 factory workers in the industrial circuits, and 100,000 or more in the trade union circuits. This approach to taking the message to where the people lived was later emulated by UNESCO in the newly emerging nations of Asia and Africa. See Rick Salutin, "The NFB Red Scare," Vancouver Sun Weekend Magazine, September 23, 1978, p. 17. 5. Morris, Embattled Shadows, p. 182. 6. Ibid. 7. Pierre Berton, Hollywood's Canada: The Americanization of Our National Image (Toronto: McClelland and Stewart, 1975), p. 169. 8. Hansard, February 20, 1948, p. 1506. 9. Salutin, "The NFB Red Scare," p. 19. 10. Michael Spencer, "Inside the Wagon Train: A Cautionary Tale. U.S.—Canada Film Relations, 1920-1986," Cinema Canada, no. 131, June 1986, p. 12. 11. Hansard, February 20, 1948, p. 1477. 12. Ibid., p. 1482. 13. The Motion Picture Producers and Distributors of America Inc., which represented the interests of the leading film combines, had an international department that handled trade matters in foreign markets until 1945. Fearing trade restrictions in postwar Europe and other parts of the world, the Motion Picture Export Association of America was organized as a separate corporation in June 1945. It was registered in 1946 with the Federal Trade Commission as a legal cartel under provisions of the Webb-Pomerene Export Trade Act of 1918. The president of the producer-distributor association was also the president of the board of the MPEAA.

292

Notes to Chapter 4

14. 15. 16. 17. 18. 19.

20. 21.

22.

23. 24.

25. 26. 27. 28. 29. 30.

The founding corporations were Columbia, Loew's, Paramount, R.K.O., Twentieth Century-Fox, United Artists, Universal, and Warner Brothers. See Thomas H. Guback, The International Film Industry: Western Europe and America since 1945 (Bloomington, Ind.: Indiana University Press, 1969), pp. 91—92. Berton, Hollywood's Canada, p. 170. Ibid. Ibid., p. 171. Ibid., p. 172. Ibid. Ross McLean was apparently not consulted by Howe regarding the CCP, although as the government's film commissioner he was its chief advisor on film policy. Michael Spencer, then at the NFB, was appointed as the liaison with the information officer of the Department of Trade and Commerce and stated that McLean was not invited to the meetings held between the MPEAA and Howe. See Spencer, "Inside the Wagon Train," p. 12. For several such "accomplishments" of the CCP, see Berton, Hollywood's Canada, pp. 175-91. Budge Crawley, owner of Crawley Films in Ottawa, was one of those private entrepreneurs opposed to the monopoly of the NFB in the field of documentary and industrial shorts. This contradiction between private Canadian capital and the state monopoly continued through the years. The Association of Motion Picture Producers and Laboratories of Canada, representing sixty-five production organizations, made repeated recommendations to various secretaries of state to end the NFB monopoly on government-sponsored films. See F. R. Crawley, "The Private Film Industry in Canada and Its Relation to Government," speech to the Conference on Canadian Information, Chateau Montebello, November 12, 1971. Michael Spencer, who was instrumental in setting up the Canadian Film Development Corporation in 1968, headed the security office at the NFB in the early 1950s. The persecution of progressive people in the NFB continued into the 1950s when Spencer apparently was able to help clear a number of them who were being scrutinized by the RCMP. See Salutin, "The NFB Red Scare," p. 21. Ibid., p. 20. Winters, an industrialist, was considered by many as a protege of C. D. Howe. Winters's alliance with the MPEAA was noted in one of its documents in the following manner: "Bob Winters as you very likely know is as swell a guy as Mike Pearson. We both got to know him pretty well and have sewed him up tight on the project. We will certainly have a very strong man in our corner . . . for any future matter which might need help and understanding from the Canadian Government." See Spencer, "Inside the Wagon Train," p. 13. Public Archives of Canada, Trade and Commerce Department Records, RG 20 Bl, Vol. 575, Steinhardt to Harmon, September 7, 1948. Public Archives of Canada, Trade and Commerce Department Records, Harmon to Jack Cohn, September 26, 1949. Public Archives of Canada, Trade and Commerce Department Records, Report on CCP Ottawa Meetings, September 29-30, 1949. Berton, Hollywood's Canada, p. 175. Ibid., pp. 172, 175. Public Archives of Canada, Trade and Commerce Department Records, Lester B. Pearson to Eric Johnston, May 12, 1952.

293

Notes to Chapter 4 31. Public Archives of Canada, Trade and Commerce Department Records, Eric Johnston to Lester B. Pearson, May 21, 1952. 32. Statistics Canada, Annual 63-207, 1959. 33. See Berton, Hollywood's Canada, p. 172, for 1963 rentals; for 1974 rentals, Motion Picture Export Association of America statistics as reported in the Canadian Film Digest, 1976, yearbook, p. 29. Disney and American International Pictures were not members of the association at that time. If those companies' rentals were included, the total film rental revenue going out of Canada to the United States would be higher. 34. Gouvernment du Quebec, A Cultural Development Policy for Quebec, Vol. 1, 1978, p. 5. 35. Canada. Report of the Royal Commission on National Development in the Arts, Letters and Sciences (Ottawa, 1951), p. XVII. 36. Ibid., p. 18. 37. For an expansion of these ideas, see E. F. Magder, "A Featureless Film Policy: Culture and the Canadian State," unpublished paper, March 1984. 38. For details on Furie's film career, see Cinema Canada, no. 26, March 1976. Jewison had an illustrious career in Hollywood, making a total of twenty-two feature films which have been nominated for forty-five Academy Awards. He has won nine. Two outstanding commercial successes to Jewison's credit are Fiddler on the Roof (1971) and Moonstruck (1988). See, "The Movie Magician," MacLeans, April 4, 1988, p. 34. 39. New Canadian Film, vol. 3, no. 13, April 1971. 40. Gilles Carle, interview, Montreal, September 12, 1987. 41. Ibid. 42. Michael Spencer, interview, Montreal, September 10, 1987. 43. Canadian Film Development Corporation, Annual Report, 1968-69, p. 9. 44. Spencer, "Inside the Wagon Train," p. 14. 45. Ibid. 46. Ibid., p. 13. 47. Ibid. 48. Hansard, June 29, 1966. 49. CFDC, Annual Report, 1968-69, p. 14. 50. Ibid., 1976-77, 1977-78. 51. Ibid., 1972-73. 52. Variety, November 27, 1974. 53. Department of The Secretary of State, "Evaluation of The Canadian Film Development Corporation, Vol. 2, September 1974, p. 7. 54. Ibid., p. 6. 55. Association of Independent and Canadian Owned Motion Picture Distributors, Brief submitted to the Secretary of State, 1977, Schedule A. 56. Canadian Motion Picture Distributors Association, Submission to the Department of Finance, July 1978, Schedule C. This association is the branch office of the Motion Picture Export Association of America. 57. Spencer, "Inside the Wagon Train," p. 14. 58. Association of Independent and Canadian Owned Motion Picture Distributors, Brief, pp. 11-12. 59. Crawley sued Universal Pictures in a U.S. court, but the case had not been heard by 1978. Budge Crawley, interview, Ottawa, November 21, 1978. 60. During the summer months (May 20 to September 7) of 1987, the total box-office revenue in the U.S.-Canada market reached a record high of $1.6 billion. That was

294

Notes to Chapter 4

61. 62. 63. 64. 65. 66. 67. 68. 69.

70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. 81. 82. 83. 84. 85. 86. 87. 88.

nearly half of the total $4 billion expected annual revenues from those markets. See A. D. Murphy, "Yep, Summer '87 Boxoffice Is a Winner," Variety, September 9, 1987, pp. 3, 32. Salmon, interview, November 15, 1978; and also Jeremy Katz, former booker for Famous Players, interview, Kingston, Ont., November 20, 1978. Daniel Weinzweig, president, Association of Independent and Canadian Owned Motion Picture Distributors, interview, Toronto, November 18, 1978. Salmon, interview, November 15, 1978. Susan M. Crean, Who's Afraid of Canadian Culture? (Toronto: General Publishing, 1976), p. 89. Variety, February 14, 1979; for more such examples, see "Indie Distribs Meet Roberts," Trade News North, no. 7, June 1978, p. 1. Weinzweig, interview. Linda Beath, partner, New Cinema Enterprises, interview, Toronto, November 16, 1978. Department of The Secretary of State," Evaluation," Vol. 1, September 1974, p. 35. The CCFM was made up of the following industry groups: Association of Canadian Television and Radio Artists, British Columbia Film Industry Association, Canadian Film Editors Guild, Canadian Society of Cinematographers, Directors Guild of Canada, International Alliance of Theatrical and Stage Employees (IATSE) 644C, IATSE 873, National Association of Broadcast Employees and Technicians, Syndicat General du Cinema et de la Television (NFB union), and the Toronto Filmmakers Co-op. See Newsletter of the Council of Canadian Filmmakers, Edition 1, April 1976, p. 2. Council of Canadian Filmmakers, "Synthesis of Film Policy Proposals," Film Policy Proposals Presented to the Goernment of Ontario, April 14, 1975, p. 2. Ibid. Ibid., p. 5. Hugh Faulkner, Statement on Cultural Policy, July 4, 1974. CYDC, Annual Reports, 1974-75. Spencer, "Inside the Wagon Train," p. 14. Ibid. CCFM, "Summary of Informed Opinion Supporting Quota and Levy," in Film Policy Proposals, pp. 2—3. CYDC, Annual Report, 1973, p. 6. Sandra Gathercole, "An Open Letter to the Ontario Government," in CCFM, Film Policy Proposals, p. 1. Toronto Star, April 15, 1975. CCFM, "Notable Quotes," in Film Policy Proposals, p. 4. Robin Spry, "Beyond Words! The Quebec Film Makers Occupation of the Censorship Office," Cinema Canada, no. 18 (March—April 1975). Ibid., pp. 39-40. Spencer, "Inside the Wagon Train," p. 15. "Secretary of State's Announcement on Film," Canadian Film Digest, 1976 Yearbook, p. 102. Cinema Canada, no. 38-39 (Summer 1975): 65. "ACTRA's Reaction," Canadian Film Digest, 1976 Yearbook, p. 103. Patrick Howe, "Distributors of Motion Pictures Expect Contest with Nationalists," Globe and Mail, May 14, 1976, p. Bl.

295

Notes to Chapter 5 89. "Draft Film Policy," Cinema Canada, no. 31 (October 1976). 90. Notes for an Address by the Honourable John R. Roberts, Secretary of State, to the Standing Committee on Broadcasting, Film and Assistance to the Arts, April 11, 1978, p. 16. 91. "CMPDA Happy," Trade News North, no. 5, April 1978, p. 11. 92. Canadian Motion Picture Distributors Association, Submission to the Federal Department of Finance, Schedule B, July 1978, pp. 8-11. 93. Ibid. p. 12. 94. "Roberts Defends Policy," Trade News North, no. 5, April 1978, p. 1. 95. "Written on the Wind," MacLean's, April 17, 1978, pp. 28-29. 96. Canadian Motion Picture Distributors Association, Submission to the Federal Department of Finance, July 1978, pp. 20-21. 97. Ibid., Schedule B, p. 12. 98. "Roberts' Film Policy Didn't Clear Finance," Trade News North, no. 4, March 1978, p. 3. 99. Canada, Report of the Federal Cultural Policy Review Committee (Ottawa: Minister of Supply and Services, 1982), p. 3, 100. Ibid., pp. 261-62.

Chapter 5 1. Canadian Film and Videotape Certification Office, Statistical Bulletin, 1974—1983 (Ottawa: Minister of Supply and Services, 1985), p. 2. 2. Ibid. 3. Film Certification Office, Capital Cost Allowance Program—Film, March 30, 1978, p. 2. 4. Ibid., p. 3. 5. Wall Street Journal, January 30, 1979. 6. Ibid. 7. Canadian Film and Videotape Certification Office, Statistical Bulletin, p. 3. 8. Rock Demers, interview, Montreal, September 11, 1987. 9. Film Certification Office, "Capital Cost Allowance Program—Film," p. 4. 10. Ibid. 11. Report of the Federal Cultural Policy Review Committee, pp. 254-55. 12. Sid Adilman, "Mull Revised Points on Canada: For 100% Tax Benefit in '81," Variety, July 30, 1980, p. 5. 13. Ibid., p. 32. 14. Sid Adilman, "Where Are the Canadian Yachts?" Variety, May 13, 1981, p. 341. 15. Adilman, "Mull Revised Points," p. 24. 16. Canadian Film and Videotape Certification Office, Statistical Bulletin, p. 2. 17. Report of the Federal Cultural Policy Review Committee," p. 255. 18. Peter Harcourt, "Film Making as a Cottage Industry," Canadian Forum, August 1979, p. 32. 19. Variety, January 10, 1979. 20. Notes for an Address by the Honourable John Roberts, Secretary of State, to the

296

Notes to Chapter 6

21. 22.

23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34.

35. 36. 37. 38.

39. 40. 41.

Standing Committee on Broadcasting, Film and Assistance to the Arts, April 11, 1978, p. 20. Hansard, June 20, 1966. E.R.A. Consulting Economists, "An Evaluation of the Impact on Canadian Feature Film Industry of the Increase to 100% of the Capital Cost Allowance," Report of the Research and Statistics Directorate, Arts and Culture Branch, Secretary of State, December 1979, p. 15. Report of the Federal Cultural Policy Review Committee, p. 256. "Meatballs Sells Like Filet Mignon: Indie Distributors Expect a Bad Year," Cinemag, no. 17, May 1, 1979, p. 3. Ibid. Ibid. "U's Pickup of Canadian-made 'Running' Cues Nationalist Beef by Home Distribs; Money Talks," Variety, February 14, 1979, p. 5, 41. Ibid. "Silence Rolls: Universal Aims 3 Pics/Yr," Cinemag, no. 22, September 15, 1979, p. 5. Ibid. Michael H. Wilson, minister of finance, The White Paper: Tax Reform 1987, June 18, 1987, p. 35. Demers, interview. Annie, Heaven's Gate, and Ishtar each cost approximately $30 million to make, but bombed at the box office. Howard Birkass, interview with Piers Handling, author and Film Festival programmer with Telefilm Canada, aired on "Morning Edition," National Public Radio, Chicago, January 23, 1987. Lea Pool, interview, Montreal, September 11, 1987. Carle, interview. For a detailed treatment of this subject, see Manjunath Pendakur, "Gandhi: Film, Fact, and Fantasy," unpublished paper, 1985. Berton made this statement as moderator of a panel, "State of the Art and Industry," at the annual Canadian Images Conference, Trent University, Peterborough, Ont., March 4-6, 1980. See Council of Canadian Film Makers, News 2, no. 5 (March 1980): 11. Ibid., p. 2. Ibid., p. 3. Ibid., p. 9.

Chapter 6 1. Canadian Film and Video Certification Office, Statistical Bulletin, p. 5. 2. Canadian Film Development Corporation, Coproduction Study, 1963-1983, Montreal, December 31, 1980 (revised March 31, 1983). (Hereafter called the Spencer Report.) 3. CFDC, Annual Report, 1968-69, p. 12.

297

Notes to Chapter 6 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24.

25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38.

298

Spencer Report, p. 5. Telefilm Canada, Coproduction Policies and Procedures, 1987, p. 5. Spencer Report, p. 6. Ibid., Appendix. Ibid. Ibid., p. 6. Telefilm Canada, From Nation to Nation: A Look at Coproductions with Canada, March 1986, p. 6. Council of Canadian Filmmakers, Report on Canada's Participation in International Feature Film Co-productions and Their Impact on the Canadian Feature Film Industry, March 3, 1980, p. 14. Spencer Report, p. 10. Ibid. Telefilm Canada, From Nation to Nation, p. 7. CFDC, Annual Report, 1976-77, p. 8. CCFM, "Report on Canada's Participation," p. 14. Ibid. Telefilm Canada, From Nation to Nation, p. 4. Ibid. Ibid., p. 6. Ibid., p. 7. CFDC, Annual Report, 1982-83, pp. 5-6. Sid Adilman, "Canadian Producers Switch to TV as Films Fade," Variety, November 23, 1983, pp. 1,51. The Changeling was financed by 264 investors putting in $25,000 each. Originally budgeted at $6.6 million, the film eventually cost $7.6 million. The producers repaid each investor a reported sum of $9,229. See Variety, October 13, 1982, pp. 7, 32. Garth H. Drabinsky, president and chief executive officer, Cineplex Corporation, interview, Toronto, September 7, 1983. John Dunning, partner, Cinepix Corporation, interview, Montreal, September 20, 1983. Drabinsky, interview. Dunning, interview. Denis Heroux, director-producer, interview, Cinevideo, Inc., Montreal, September 20, 1983. Manjunath Pendakur, "Canadian Feature Films in the Chicago Theatrical Market, 1978-1981: Economic Relations and Some Public Policy Questions," in Bruce A. Austin, ed., Current Research in Film, vol. 2 (Norwood, N.J.: Ablex, 1986), pp. 193-97. Heroux, interview. Drabinsky, interview. Dunning, interview. Heroux, interview. Harold Greenberg, president, Astral Bellevue-Pathe, interview, Montreal, September 19, 1983. Heroux, interview. Dunning, interview. Michael Dorland, "Quest for Equality: Canada and Coproductions. A Retrospective (1963-1983)," Cinema Canada, no. 100 (October 1983): 18.

Notes to Chapter 7 39. Francis Fox, "Added Dimensions to the 'Appalling' State of Canada's Film Trade," Globe and Mail, September 15, 1982, p. 7. 40. Foreign programs (mainly U.S.) accounted for 85 percent of prime-time viewing on English-language television stations and 77 percent of total viewing throughout the day. Imported programs, particularly from the United States, accounted for 83 percent of all drama programming available for French audiences. See [Canada] Department of Communications, Towards a New National Broadcasting Policy (Ottawa: Minister of Supply and Services, 1983). 41. Telefilm Canada, Annual Report, 1985-86, p. 17. 42. Telefilm Canada, Coproduction Policies & Procedures, p. 8. 43. Telefilm Canada, Annual Report, 1985-86, p. 14. 44. Ibid. 45. John Haslett Cuff, "It's Take One for Huge Film Factory: Dependence on U.S. Worries Some Insiders," Globe and Mail, March 26, 1987, p. 17. 46. "Hollywood's Yukon Trail: U.S. Filmmakers Like Canada's Low-Cost Features," Newsweek, November 17, 1987, p. 68. 47. Ibid. 48. Joe Shapiro, senior vice-president, general counsel, Walt Disney Productions, Letter to the Minister of Industrial Expansion, Investment Canada, Ottawa, September 23, 1985, Schedule A. 49. Cuff, "It's Take One." 50. Ibid. 51. "Lotsa Canadian Series on U.S. TV," Variety, November 25, 1987, p. 74. 52. Ibid., p. 46. 53. For an analysis of the British film industry becoming an extension of the U.S. film industry and thereby subjected to the latter's interests and priorities, see Guback, The International Film Industry. 54. Morris, Embattled Shadows, pp. 175-216.

Chapter 7 1. 2. 3. 4.

"Hollywood Gives the Small Fry a Chance," McLean's, June 20, 1983, p. 24. Variety, Daily, ed. June 10, 1983, p. 1. Consumer and Corporate Affairs Canada, news release, Ottawa, June 7, 1983, p. 2. This inquiry was initiated by a group of nine concerned citizens, who were also active in the film industry. It is a procedure provided under Section 7 of the Combines Act. The inquiry led to some price-fixing cases and conviction of Columbia Pictures. For a discussion of those cases, see Chapter 3. The substantial issue raised by the nine citizens of market domination by the majors in distribution and exhibition was not resolved. 5. Stan Darwood started the American Multi-Cinema Corporation after hearing Taylor's 1965 keynote speech to Showest promoting the economic value of multiplescreen theaters. Darwood's enterprise is one of the ten largest theater companies in North America now. See Sid Adilman, "The Man Behind the Multiplex, and Cineplex," Variety, April 26-May 2, 1989, p. 50. 6. Garth Drabinsky authored a book entitled Motion Pictures and the Arts in Canada: The

299

Notes to Chapter 7

7. 8. 9.

10. 11. 12.

13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25.

26.

300

Business and the Law (Toronto: McGraw-Hill Ryerson, 1976). In 1977, his company Tiberius Productions produced two pictures with combined budgets of almost $3.2 million: The Disappearance, starring Donald Sutherland, and Silent Partner, with Elliott Gould, Christopher Plummer, and Susannah York. For further details, see Garth Howard Drabinsky, president and chief executive officer, Cineplex Corporation, Biography, Cineplex press kit, n.d. Drabinsky, interview, Toronto, September 6, 1983. "Cineplex Expands on Multiscreen Theaters, but Some Say Its Future Is Doomed by TV," Wall Street Journal, November 9, 1981. Cadillac Fairview Corporation is one of the largest real estate developers in the country. It is 37 percent owned by the Bronfman-controlled Cemp Trusts which has investments in several communications enterprises in Canada. According to C.R.B. Salmon, the Bronfmans had financed Paul Nathanson in the 1960s to organize a third theater circuit which had failed. For an interesting account of the Bronfman family and corporate history, see Peter C. Newman, Bronfman Dynasty (Toronto: McClelland Stewart-Bantam Books, 1978), p. 231. Cineplex Corporation, prospectus, issued by Merit Investment Corporation, September 16, 1982, pp. 30-31. Ibid., pp. 6-7. Conversion to 35mm projection was a major decision for Cineplex, according to Drabinsky. It became feasible because a national building code came into effect which superseded the "more archaic" building standards of the provinces. Drabinsky, interview. Ibid. Ibid. Cineplex Corporation, Annual Report, 1982, p. 4. Variety, September 22, 1982, p. 26. Drabinsky, interview. Ibid. Tiberius had no revenues for the years 1979 to 1981, and PanCanadian's revenues were relatively small—$323,435 in 1979 and $1,001,072 in 1981. Cineplex Corporation, prospectus, p. 17. Ibid., p. 15. Ibid., p. 21. Cineplex Corporation, Annual Report, 1982, p. 10. Cineplex Corporation, prospectus, pp. 26-35. Patricia Best, "Cineplex's Drabinsky Trims Sails, Pushes On," Financial Post, August 27, 1983, p. 1. The Winter Garden Theatre was built in 1913 by Marcus Loew on Yonge Street in Toronto. It consists of two auditoriums, one above the other, with an approximate seating capacity of 1,700 and 1,100 seats. Cineplex had leased it in partnership with another firm for forty years at an annual rent of one dollar. It had planned to renovate the old theaters into a facility where live theater and concert performances could be staged. The renovations were to cost approximately $8 million, half of which would come from the Ministry of Citizenship and Culture of the province of Ontario and the Ontario Heritage Foundation. Cineplex Corporation, prospectus, p. 15. Drabinsky, interview.

Notes to Chapter 7 27. Sid Adilman, "Distribution Deal means More Movies in More Theatres," Toronto Star, June 10, 1983. 28. Cineplex had retained management of that theater for a fee and an option to acquire 50 percent interest in the partnership, Drabinsky characterized these events as "humiliations of the past year." Eventually he regained control of the Beverly Center. Cineplex Corporation, Annual Report, 1982, p. 2. 29. Drabinsky, interview. 30. Ibid. 31. The Restrictive Trade Practices Commission was created by Parliament in 1952 based on the recommendations of the McQuary Committee. 32. Consumer and Corporate Affairs Canada, Director of Investigation and Research, Combines Investigation Act, Annual Report, March 31, 1978, p. 7. 33. Ibid. 34. The Combines Investigation Act did not apply to regulated industries by federal, provincial, or municipal governments, which may restrict competition in such fields as marketing, resource conservation, and communication systems. In other words, just as in the United States, the state saw fit to allow concentration of capital in certain sections of the economy and not in others. Ibid., pp. 7—10. 35. Note that a corporation is treated like a person under the law, and product is defined to mean both an article and a service, as the case may be. Combines Investigation Act, 1978 (Ottawa: Minister of Supply and Services, 1981), pp. 27-28. 36. Ibid. 37. Consumer and Corporate Affairs Canada, Director of Investigation and Research, Combines Investigation Act, Annual Report, March 31, 1978, p. 7. 38. According to D. W. E. Partridge of Consumer and Corporate Affairs Canada, Cineplex had made the initial contact with him through their counsel in the latter half of August 1982. It is possible that Drabinsky's meeting with Hunter took place sometime after that date. 39. Drabinsky, interview. The investigation to which Drabinsky refers was the inquiry initiated in 1967 by a group of nine concerned citizens. As of August 1, 1982, Cineplex employed sixty-four persons full time in all three divisions and 450 parttime workers at various theater locations. Cineplex Corportion, Annual Report, 1982. 40. Ibid. 41. Consumer and Corporate Affairs Canada, Director of Investigation and Research, Application to the Restrictive Trade Practices Commission in respect to Cineplex, December 12, 1982, pp. 4-7. 42. Consumer and Corporate Affairs Canada, Restrictive Trade Practices Commission, Public Hearing, in the Matter of an Application under Subsection 31.2 of the Combines Investigation Act for an Order against the Respondents, Astral Films Ltd. et aL, to Compel Them to Accept Cineplex Corporation as a Customer," prehearing, Ottawa, May 4, 1983, pp. 130-31. 43. Two separate motions were filed by the distributors with the federal court for reasons not known to me. They were heard and argued at the same time. Federal Court of Canada, Trial Division, Court File nos. T-1062-83, T-1063-83, Ottawa, May 13, 1983. 44. Letter written to Lawson A. W. Hunter, director of investigation and research, Combines Investigation Act, Ottawa, n.d.

301

Notes to Chapter 7 45. These conditions are presented here verbatim. See Consumer and Corporate Affairs Canada, Director of Investigation and Research, Combines Investigation Act, Report to the Restrictive Trade Practices Commission on the Operation of the Undertakings Given by Six Major Motion Picture Distributors, March 1984, pp. 23-24. 46. Although I had access to all the reports, specific pieces of data such as contracts and letters exchanged between distributors and exhibitors in this case were not in the public domain and were unavailable to me. 47. The director found that most of the distributors' major summer releases in 1983 were either released before July 1, 1983 (when the undertakings came into effect), or were licensed prior to the effective date of the undertakings. As the summer releases account for almost 30 to 35 percent of the total annual rentals of the majors, it was not possible to make a complete assessment of the changes introduced by the undertakings in film distribution and exhibition in Canada unless the monitoring period was extended. The director obtained permission from the RTPC to extend the time for filing the final report until March 1, 1984, with no objection from the majors. This resulted in the inclusion of all the licensing decisions made by the majors of their Christmas 1983 releases in the final report. 48. Consumer and Corporate Affairs Canada, "Report to the Restrictive," March 1984, pp. 39-40. 49. Consumer and Corporate Affairs Canada, Director of Investigation and Research, Combines Investigation Act, Final Report to the Restrictive Trade Practices Commission on the Operation of the Undertakings Given by Six Major Motion Picture Distributors, July 31, 1984, p. 15. 50. Blind bidding was found to have induced significant price competition for first-run films in the Milwaukee market which the exhibitors characterized as "destructive." See United States of America v. Capitol Services, Inc., Kohlberg Theatres Service Corporation, Marcus Theatres Corporation, and United Artists Theatre Circuit, Inc., Case no. 80C-407,June 16, 1983. 51. Sid Adilman, "U.S. Majors to Go Pic-by-Pic in Canada: Must Bid Rules Cut 50-Year Ties," Variety, June 15, 1983, p. 5. 52. Motion Picture Association of America, Fact Sheet, n.d. This document was circulated by the MPAA to lobby against House Bill 59, intended to prohibit blind bidding by the state of New Hampshire legislature in 1985, which was enacted into law effective January 1, 1986. 53. Glen Trotiner, "Coming to a Theatre Near You: Movie Distributors Challenge Exhibitor Instigated Anti-Blind Bidding Statutes," Cordozo Arts and Entertainment Law Journal, vol. 3, no. 1 (1984): 163. 54. Dan Westell, "Film Pact Sparks Conflict among Principal Players," Globe and Mail, June 9, 1983. 55. Ibid. 56. Consumer and Corporate Affairs Canada, Director of Investigation and Research, Combines Investigation Act, Report to the Restrictive Trade Practices Commission, p. 28. 57. Ibid., pp. 29-34. 58. D. W. E. Partridge, senior commerce officer, Consumer and Corporate Affairs Canada, Ottawa, March 8, 1985 [telephone]. 59. Cineplex Odeon Corporation, news release, February 8, 1985. 60. A violation of the merger provisions of the act requires proof of actual or likely detriment beyond a reasonable doubt. See Consumer and Corporate Affairs Canada, Director of Investigation and Research, Final Report, July 31, 1984, p. 6.

302

Notes to Chapter 7 61. Cineplex Odeon Corporation, news release, August 15, 1985, p. 2. 62. Ibid., p. 1. 63. For a thorough historical analysis of the role of finance capital, particularly that of the Bank of America, in the American film industry, see Janet Wasko, Movies and Money; Financing the American Film Industry (Norwood, N.J.: Ablex, 1982). 64. Cineplex Odeon Corporation, Annual Report, 1985, p. 2. 65. Cineplex Odeon Corporation, news release, May 27, 1986. 66. Leonard Zefir, "Screen Giant Garth Drabinsky Jars Movie-House Industry, Sets New Standards," Wall Street Journal, March 16, 1987, p. 1. 67. Cineplex Odeon Corporation, Annual Report, 1986, p. 3. 68. Cineplex's dominant position in the Canadian theatrical market would soon result in aggressive behavior against Famous Players, just as Famous Players had done in its expansion against the independents. In March 1987, Drabinsky leased half of the building in which Imperial Six, a Famous Players' theater, was housed. It was reported that his construction crew moved in the early hours of the next morning with guard dogs and security forces to divide the building with wooden barriers and chain-link fences. When they were done, the access to Famous Players theaters was completely closed except for the fire exits. The result was that Imperial Six was shut down by Famous Players. George Destounis, recently retired president of Famous Players, was noted to have said, "What Cineplex did was unconscionable, irresponsible and unfair," to which Drabinsky apparently replied, "Obviously, it was very effective." Zefir, "Screen Giant," p. 1. 69. Cineplex Odeon Corporation, prospectus, Issued by Merill Lynch Capital Markets, March 26, 1987, p. 3. 70. Cineplex Odeon Corporation, Annual Report, 1985, p. 3. 71. Cineplex Odeon Corporation, news release, January 15, 1986, p. 3. 72. Ibid. 73. Cineplex Odeon Corporation, prospectus, p. 27. 74. Ibid., p. 25. 75. Cineplex Odeon Corporation, Notice of Annual and Special meeting of Shareholders, April 28, 1987, p. 12. 76. Ibid. 77. Ibid., p. 14. 78. Cineplex Corporation, prospectus, p. 4. 79. Since Ronald Reagan's election to the presidency of the United States, institutions such as the Federal Trade Commission and the Justice Department which oversee the marketplace have been used not to curb monopolies but to assist their growth. Euphemistically called deregulation, the policy of the administration has been to overlook major mergers that have occurred in various industries, including the entertainment industry. The seven major film production and distribution combines which were barred by the Supreme Court in 1948 from owning any theaters have actually begun to acquire theaters because of relaxation of antitrust enforcement under the Reagan administration. See Dave Kehr, "Mr. Cineplex: Determination Marks the Silver Screen's Golden Boy," Chicago Tribune, February 1, 1987, pp. 6-8. 80. Charles Kipps, "Mayor Koch Blasts $7 Admission, Backs Boycott of Pricey Houses," Variety, December 30, 1987, p. 3. 81. Cineplex Odeon entered into a joint venture with Norfork Productions Inc., a company owned by Robert Redford, to purchase worldwide distribution rights of a

303

Notes to Chapter 8 minimum of five films over a five-year period, each budgeted for approximately $5 million. No such contracts were announced with Canadian filmmakers. Cineplex Odeon Corporation, Third Quarter Report, November 25, 1987, pp. 6—7.

Chapter 8 1. Toronto Globe and Mail, November 5, 1987, p. A7. 2. "Film Distribution, Exhibition and Marketing," Task Force Report, January 25, 1983, pp. 47-48. 3. Ibid., p. 50. 4. Consumer and Corporate Affairs Canada, Bureau of Competition Policy, Application of the Combines Investigation Act to Services, April 1978, p. 4. 5. Foreign Investment Review Act, Chapter 46, December 12, 1973, pp. 1-2. 6. Sid Adilman, "Canada's Fox Slams Local Colapix Yoke," Variety, September 22, 1982, pp. 3, 34. 7. Steven Bach, Final Cut: Dreams and Disaster in the Making of Heaven's Gate (New York: New American Library, 1985), p. 57. 8. In a letter to me dated July 26, 1984, Ruth Fothergill of the Service and Construction Branch Assessment bureau of the Foreign Investment Review Agency noted that FIRA is not obligated under the law to release the reasons for its decisions to the public. Fothergill, however, provided a document that assessed significant benefits to Canada from allowed transactions. Of the twenty-seven applications reviewed by FIRA, it disallowed only two, which included Orion Pictures. So it may be concluded that there was no significant attempt made by Canada at this time to keep American investment out. See Foreign Investment Review Agency, release/ communique, September 30, 1983, pp. 1-6. 9. Department of Communications, The National Film and Video Policy (Ottawa: Minister of Supply and Services, May 1984), p. 3. 10. Ibid., p. 40. 11. For a treatment of those issues as they specifically relate to Canadian cultural policy, see Manjunath Pendakur, "United States-Canada Relations: Cultural Dependence and Conflict," in Vincent Mosco and Janet Wasko, eds., The Critical Communication Review: Changing Patterns of Communications Control (Norwood, N.J.: Ablex, 1984), Vol. 2. 12. Quoted in Variety, September 8, 1982, p. 124. 13. In an interesting article, Joyce Nelson argues that the idea of free trade was planted in Canada by American ambassador Paul Robinson to preserve the MPEAA's control over the Canadian film industry. Corporate solidarity was first achieved by way of Sam Hughes, president of the Canadian Chamber of Commerce, who held meetings with Tom d'Aquino, president of the Business Council on National issues, a lobby group representing 150 blue-chip corporations, and Roy Phillips, executive director of the Canadian Manufacturers Association. They apparently did the necessary political work to put the free trade idea on the national political agenda. See Joyce Nelson, "Losing It in the Lobby," This Magazine 20 (October-November 1986): 14-23. 14. Clement Richard, former minister of cultural affairs, Government of Quebec, inter-

304

Notes to Chapter 8

15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49.

view, Montreal, September 8, 1987. In the early 1980s, the majors controlled 41 percent of screen time and took in 56 percent of the box office from Quebec, amounting to $23 million. Ibid. Nelson, "Losing It in the Lobby," p. 18. Clement Richard stated in his interview with me that he was personally opposed to the concept of quotas while he believed in incentives. Michel Houle, "Power Protects," Cinema Canada, no. 139, March 1987, p. 16. Ibid., p. 17. Ibid.; also see Antonia Zerbisias, "U.S. Govt. Protests Quebec Distrib Ban," Variety, June 22, 1983, pp. 5, 38. Houle, "Power Protects," p. 17. Government of Quebec, National Assembly, Bill 109, Thirty-second Legislature, Fourth Session, Quebec Official Publisher, 1983, pp. 22-23. Houle, "Power Protects," p. 17. Richard, interview. Ibid. Houle, "Power Protects," p. 17. Ibid. Ibid. Richard, interview. Houle, "Power Protects," p. 17. Richard, interview. Ibid. Houle, "Power Protects," p. 17. Ibid., p. 21. From Memorandum of Agreement between the Minister of Cultural Affairs of Quebec and the Motion Picture Export Association of America and Its Members, Montreal, October 22, 1986, pp. 1-5. Houle, "Power Protects," pp. 18-19. Richard, interview. "Canadian Cinema: A Solid Base," Report of the Film Industry Task Force (Ottawa: Minister of Supply and Services, November 1985), p. 7. Ibid., pp. 8-9. "Paramount Raids Norstar, Takes Atlantic," Cinema Canada, no. 131, June 1986, pp. 35-36. Ibid., p. 36. Ibid. Department of Communications, Notes for Remarks by the Honourable Flora MacDonald, M.R for Kingston and the Islands, Minister of Communications on New Measures concerning Film Importation in Canada, Toronto, February 13, 1987, pp. 6-7. Ibid., p. 4. Ibid., p. 5. Sid Adilman, "Dollar Discrepancies on Canada Bill: Potential U.S. Laws Disputed," Variety, June 24, 1987, pp. 5, 35. Ibid., p. 35. John Taylor, Storming the Magic Kingdom: Wall Street, the Raiders and the Battle for Disney (New York: Alfred A. Knopf, 1987). Investment Canada Act (Ottawa: Minister of Supply and Services, March 1986), p. 1.

305

Notes to Chapter 8 50. Ibid., p. 12. 51. Walt Disney Productions, Investment Canada Notification, July 24, 1985, Schedule A, p.l. 52. Ibid., Schedule B, p. 1. 53. Joe Shapiro, senior vice-president, legal affairs, Walt Disney Corporation, Letter to the Minister of Regional Industrial Expansion, Investment Canada, August 27, 1985, p. 2. 54. Ibid. 55. Joe Shapiro, senior vice-president, general counsel, Walt Disney Productions, Letter to the Minister of Regional Industrial Expansion, Investment Canada, September 23, 1985, p. 3. 56. Hy Rollings, "Distribs Orgs Rift over Rosenfield's Letter to Canada," Variety, June 24, 1987, pp. 1,25. 57. Ibid. 58. Virginia Kelly, "Against All Odds," Cinema Canada, no. 144, September 1987, pp. 10-15. 59. Richard H. Frank, president, Walt Disney Studios, interview, Los Angeles, July 17, 1987 [telephone]. 60. Ian Austen, "Hollywood Goes to War," Maclean's, June 22, 1987, p. 54. 61. Alexander Cockburn, "Beat the Devil. The Mission: Reagan, Hollywood and the American Empire," Nation, April 18, 1987, pp. 494-95. 62. U.S. Congressional Record—Senate, June 5, 1987, p. S7750. 63. Ibid., p. S7751. 64. Ibid. 65. George P. Shultz, "The Shape, Scope, and Consequence of the Age of Information," Current Policy no. 811, U.S. Department of State, Bureau of Public Affairs, Washington, D.C.. Delivered as an address to the Stanford University Alumni Association's first International Conference, Paris, March 21, 1986, p. 2. 66. Ibid. 67. Garth H. Drabinsky, Competition Legislation and the Canadian Exhibition Industry, address to the Broadcast Executive Society, Toronto, January 13, 1983, pp. 12-13. 68. "Canadian Citizen and North American Businessman," Business of Film, September 1986, p. 40. 69. Garth H. Drabinsky, The Great Trade Debate, Canada California Chamber of Commerce, Los Angeles, February 4, 1987, p. 8. 70. Sid Adilman, "Drabinsky Lambastes Canada Solons: Decries Varying Film Policies," Variety, September 16, 1987, p. 5. 71. Austen, "Hollywood Goes to War," p. 54. 72. Sid Adilman, "Canadian Distribs Shut Out of Pics," Variety, May 20, 1987, p. 3. 73. Ibid., p. 39; also see Austen, "Hollywood Goes to War," p. 54. 74. Anthony Smith, The Geopolitics of Information: How Western Culture Dominates the World (London: Faber and Faber, 1980), p. 54.

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Books Audley, Paul. Canada's Cultural Industries: Broadcasting, Publishing, Records and Film. Toronto: James Lorimar, 1983. Babe, Robert E. Canadian Television Broadcasting: Structure, Performance, and Regulation. Ottawa: Economic Council of Canada, 1979. Bach, Steven. Final Cut: Dreams and Disaster in the Making of Heaven's Gate. New York: New American Library, 1985. Backhouse, Charles F. Canadian Government Motion Picture Bureau, 1917—1941. Ottawa: Canadian Film Institute, 1974. Bagdikian, Ben H. The Media Monopoly. Boston: Beacon Press, 1983, 1987. Balio, Tino. United Artists: The Company Built by the Stars. Madison: University of Wisconsin Press, 1976. Beattie, Eleanor G. A Handbook of Canadian Film, 2d ed. Toronto: Peter Martin Associates, 1977. Berton, Pierre. Hollywood's Canada: The Americanization of Our National Image. Toronto: McClelland and Stewart, 1975. Canadian Film Institute. Film Canadiana: Year Book of Canadian Cinema. Ottawa, 1977—78. Chamberlin, Edward H. The Theory of Monopolistic Competition. Cambridge, Mass.: Harvard University Press, 1933. Clement, Wallace. The Canadian Corporate Elite: An Analysis of Economic Power. Toronto: McClelland and Stewart, 1975. Conant, Michael. Antitrust in the Motion Picture Industry: Economic and Legal Analysis. Berkeley and Los Angeles: University of California Press, 1960. Crean, Susan M. Who's Afraid of Canadian Culture? Toronto: General Publishing, 1976. Drabinsky, Garth H. Motion Pictures and the Arts in Canada: The Business and the Law. Toronto: McGraw-Hill Ryerson, 1976. Engler, Robert. The Brotherhood of Oil. New York: Mentor, 1977. . The Politics of Oil. New York: Mentor, 1977. Evans, Gary. John Grierson and the National Film Board: The Politics of Wartime Propaganda 1939-1945. Toronto: University of Toronto Press, 1984. Feldman, Seth, and Joyce Nelson. Canadian Film Reader. Toronto: Peter Martin Associates, 1977. Ferns, H. S., and B. Ostry. The Age of MacKenzie King: The Rise of the Leader. London: William Heinmann; Toronto: British Book Service, 1955. Fulford, Robert. The Arts in Canada. Toronto: Copp Clark Publishing, 1976. Greene, Felix. The Enemy: What Every American Should Know About Imperialism. New York: Vintage Books, 1970. Guback, Thomas H. The International Film Industry: Western Europe and America since 1945. Bloomington: Indiana University Press, 1969. Hampton, Benjamin B. History of the American Film Industry, From its Beginnings to 1931. New York: Covici, Friede, 1931; reprint New York: Dover, 1970.

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Bibliography Handling, Piers. Canadian Feature Films, 1964—1969, Ottawa: Canadian Film Institute, 1976. Hofsess, John. Inner Views: Ten Canadian Film Makers. Toronto: McGraw-Hill Ryerson, 1975. Howard, Richard, Jacques Lacoursiere, and Claude Bouchard. A New History of Canada: A Time of Shocks, 1926-1939, Montreal: Editions Format, 1973. Huettig, Mae D. Economic Control of the Motion Picture Industry: A Study in Industrial Organization. Philadelphia: University of Pennsylvania Press, 1944; reprint New York: Jerome S. Ozer, 1971. Lawson, John Howard. Film in the Battle of Ideas. New York: Masses and Mainstream, 1953. Laxer, Robert M., ed. (Canada) Ltd.: The Political Economy of Dependency. Toronto: McClelland and Stewart, 1973. Levitt, Kari. Silent Surrender: The American Economic Empire in Canada. New York: Liveright, 1970. Low, Rachel. The History of the British Film, 1918-1929. London: George Allen and Unwin, 1971. Lower, J. A. A Nation Developing: A Brief History of Canada. Toronto: Ryerson Press, 1970. McQueen, Humphrey. Australia's Media Monopolies. Camberwell, Victoria: Widescope, 1977. Many Voices One World. Paris: UNESCO, 1980. Metz, Robert. CBS: Reflections in a Bloodshot Eye. New York: New American Library, 1975. Moley, Ray. The Hays Office. Indianapolis: Bobbs-Merrill, 1945. Morris, Peter. Canadian Feature Films, 1913—1940. Ottawa: Canadian Film Institute, 1970. . Embattled Shadows: A History of Canadian Cinema 1895-1939. Kingston, Ont.: McGill-Queen's Press, 1978. Mueller, Willard F. A Primer on Monopoly and Competition. New York: Random House, 1970. Newman, Peter C. Bronfman Dynasty. Toronto: McClellan Stewart—Bantam Books, 1978. . The Distemper of Our Times. Toronto: McClelland and Stewart, 1968. Nordenstreng, Kaarle, and Tapio Varis. Television Traffic: A One-Way Street? Paris: UNESCO, 1974. North, Joseph H. The Early Development of the Motion Picture, 1887-1909. New York: Arno Press, 1973. Reid, Allison. Canadian Women Film-Makers: An Interim Filmography. Ottawa: Canadian Film Institute, 1972. Robinson, Joan. The Theory of Imperfect Competition. London: MacMillan, 1933. Rosenberg, Emily S. Spreading the American Dream: American Economic and Cultural Expansion, 1890-1945. New York: Hill and Wang, 1982. Samuelson, Paul A. Economics, 9th ed. New York: McGraw-Hill, 1973. Schiller, Herbert I. Communications and Cultural Domination. White Plains, N.Y.: International Arts and Sciences Press, 1976. . Mass Communications and the American Empire. New York: Beacon Press, 1971. Seabury, William Marston. The Public and the Motion Picture Industry. New York: MacMillan, 1926. Sinclair, Upton B. Upton Sinclair Presents William Fox. Los Angeles: author, 1933; reprint New York; Arno Press and the New York Times, 1970.

316

Bibliography Smith, Anthony. The Geopolitics of Information; How Western Culture Dominates the World. London: Faber and Faber, 1980. Smythe, Dallas W. Dependency Road: Communications, Capitalism, Consciousness, and Canada. Norwood, N.J.: Ablex, 1981. Stanbury, W. T. Anti-Combines Law and Policy in Canada, 1888—1975: A Bibliography. Agincourt: Canada Law Book, 1976. Taylor, John. Storming the Magic Kingdom: Wall Street, the Raiders and the Battle for Disney. New York: Alfred A. Knopf, 1987. Thompson, Krsitin. Exporting Entertainment: America in the World Film Market, 1907—34. London: BFI Publishing, 1985. Tunstall, Jeremy. Media Are American: Anglo-American Media in the World. London: Constable, 1977. Wasko, Janet. Movies and Money: Financing the American Film Industry. Norwood, N.J.: Ablex, 1982.

Interviews G. Chalmers Adams, producer, president, Clearwater Films Ltd. Toronto, November 13, 1978. Francine Allaire, marketing and distribution, Telefilm Canada. Montreal, September 8, 1987. Denys Arcand, film director. Montreal, September 9, 1987. Jean Pierre Bastien, director, Ministry of Cultural Affairs, Government of Quebec. Quebec City, May 26, 1987. Linda Beath, partner, new Cinema Enterprises. Toronto, November 16, 1978. Jack Bernstein, head booker, Famous Players Ltd. Toronto, November 14, 1978. Martin Bockner, distributor, Saguenay Films. Toronto, November 15, 1978; June 18, 1981. Gilles Carles, writer-director. Montreal, September 12, 1987. Ron Cohen, producer. Toronto, September 20, 1983 [telephone]. Armand Cournoyer, distribution, Canadian Film Development Corporation. Montreal, November 27, 1978. Kirwan Cox, producer, author, policy advisor, National Film Board of Canada. November 13, 1978. R. F. (Budge) Crawley, producer-director, Crawley Films. Ottawa, November 21, 1978. Zale Dalen, director, partner, Highlight Productions Ltd. Vancouver, October 24, 1978. Rock Demers, producer, president, Association des Producteurs de Films et Video du Quebec. Montreal, September 11, 1987. George P. Destounis, president, Famous Players Ltd. Toronto, November 10, 1978 [telephone]. Garth H. Drabinsky, producer-distributor-exhibitor, chief executive officer, Cineplex Corporation. Toronto, September 7, 1983. John Dunning, exhibitor-producer-distributor, partner, Cinepix Corporation. Montreal, September 20, 1983. Richard H. Frank, president, Walt Disney Studios. Los Angeles, July 17, 1987 [telephone].

317

Bibliography Don Goldberg, writer-producer. Toronto, August 30, 1983 [telephone]. Jack Gray, president, Association of Canadian Television and Radio Artists. Toronto, June 16, 1981. Harold Greenberg, president, chief executive officer, Astral Bellevue Pathe, Inc. Montreal, September 19, 1983. Piers Handling, author, director, Canadian Film Institute. Ottawa, November 22, 1978. Claude Heroux, producer. Montreal, September 25, 1983 [telephone]. Denis Heroux, director-producer, Cinevideo, Inc. Montreal, September 20, 1983. Michel Houle, researcher. Montreal, May 27, 1987. Dinah Hoyle, film policy officer, Secretary of State. Ottawa, November 22, 1978. Pierre Jolin, director, U.S. Division, International Affairs, Government of Quebec. Quebec City, May 26, 1987. Jeremy Katz, former booker, Famous Players Ltd., National Film Board of Canada Branch Office. Kingston, Ont., November 20, 1978. Michelene Lanctot, director. Montreal, September 10, 1987. Pete Legault, Canadian Film Development Corporation. Toronto, November 28, 1978. Richard Leiterman, director of cinematography, president, CAMERA. Toronto, June 16, 1981. Michael McCabe, executive director, Canadian Film Development Corporation. Montreal, November 21, 1978. Sandra MacDonald, film policy officer, Department of Communications. Ottawa, July 27, 1987; August 18, 1987 [telephone]. Guy Mason, manager, Canadian Audio-Visual Certification Office, Department of Communications. Ottawa, July 27, 1987 [telephone]. Gordon F. Noble, former film policy officer, Department of Communications. Ottawa, November 21, 1978. D. W. E. Partridge, senior commerce officer, Consumer and Corporate Affairs Canada. Ottawa, December 28, 1978; March 8, 1985 [telephone]. David Perlmutter, president, Canadian Association of Motion Picture Producers. Toronto, November 13, 1978. Lea Pool, writer-director. Montreal, September 11, 1987. Gerald Pratley, director, Ontario Film Institute. Don Mills, Ont., June 17, 1981. Clement Richard, former minister of cultural affairs, Government of Quebec; president, Lavalin Corporation. Montreal, September 8, 1987. Millard Roth, director, Canadian Motion Picture Distributors Association. Toronto, November 14, 1978. C. R. B. Salmon, chairperson, Canadian Odeon Theatres. Toronto, November 15, 1978; May 29, 1980. Maria Sauer, Directions des Relations avec les Organismes, Ministere des Affaires Culturelle, Gouvernment du Quebec. Quebec City, May 25, 1987. Paul Silk, branch manager, Orion Pictures. Chicago, July 15, 1983. Douglas M. Smith, manager, Stanely Theatre. Vancouver, January 5, 1979. Michael D. Spencer, former executive director, CFDC; president, Film Finance Canada. Montreal, September 10, 1987. Andre Thiberge, Societe Generate de Cinema du Quebec, Gouvernment du Quebec. Montreal, September 9, 1987. Marie Thiberge, script supervisor. Montreal, September 12, 1987. Marcel Venne, president, Association des Proprietaires de Cinema du Quebec. Montreal, May 27, 1987.

318

Bibliography Pierre Veronneau, scholar, programming-research-publication, La Cinematheque Quebecoise. Montreal, September 9, 1987. Marvin Weiner, distributor, Cinepix Corporation. Montreal, November 27, 1978. Daniel Weinzweig, producer-distributor; partner, Danton Films; president, Association of Canadian Independent Motion Picture Distributors. Toronto, November 18, 1978.

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Index Addy, George, 237 Affaire Coffin, L', 213 Agency, 173 Allen, Herb, 105 Allen, Jay, 62 Allen Amusement Corporation, 52 Allen Theatres, 51-54, 56-57, 59, 6162, 97, 275 Ambassador, 255-56, 258 American film industry: and cultural diplomacy, 36; domestic vs offshore production in, 217, 218; Hays Organization in, 80; in-house vs outside acquisitions of, 219, 220, 221; worldclass films in, 188 American film industry in Canada: Cineplex Odeon in, 245, 246, 249; and combines law, 87, 222-23, 232, 235-38; Cooper Organization in, 7987, 89, 90, 93; data sources on, 43; distribution monopoly of, 69—78, 98— 100, 108-9, 119-20, 153-55, 157, 258-59; early history of, 52, 53-54; exhibition monopoly of, 61 —66 (see also Famous Players Canadian Corporation); lobby against federal distribution bill, 270-73; lobby against Quebec cinema act, 260, 261, 262, 263, 264; lobby against quotas, 135-36, 163-65, 166, 167-68; revenues of, 112-14, 120-22, 266; vertical integration of, 56-61. See also Coproductions American Film Marketing Association (AFMA), 269-70

American International Pictures, 153 Amerika, 217 Analytical tools, 39-42 Anne of Green Gables, 215 Anne Trister, 190 Antitrust law. See Combines law Apprenticeship of Duddy Kravitz, The, 151, 156 Arcand, Denys, 179 Associated Screen News of Canada, 133 Association des Realisteurs de Film du Quebec, 162 Association of Canadian Cinema, Television and Radio Artists, 201 Association Professionelle des Cineastes du Quebec, 143 Astral Films Limited, 123, 184, 211, 232, 237 Atlantic City, 209-10 Atlantic Releasing Corporation, 264, 265 Atlantis Films Limited, 216 A tout prendre, 146 Attenborough, Richard, 191, 192 Atwood, Margaret, 251 Audley, Paul, 44 Avco Embassy Pictures, 123, 153 B & F Theatres Limited, 61, 64-65 Bacon, Lise, 262-63 Bairnsfather, Bruce, 54 Balaban, Barney, 96, 98 Bassett,JohnF, 160 Beaudin, Jean, 213 Beaverbrook, Lord, 59

321

Index Bellevue Films, 118, 123, 130 Benjamin, Bob, 255 Bennett, R. B., 93, 107 Benton, William E, 36 Bentsen, Lloyd, 271 Bernstein, Bill, 255 Berton, Pierre, 192 Best efforts clause, 208 Betha, Linda, 258 Beveridge, James, 36-37 Bickell,]. R, 57 Bilingualism, 22 Bill 109, 259, 260 Black Christmas, 151, 156 Blind bidding, 243-44 Blind booking, 75 Block booking, 76-77, 120 Boards of trade, 86-87, 89 Bockner, Martin, 258 Bons Debarras, Les, 213 Box-office levy, 159, 160 Bragg, Tom, 66, 98 Branch plant film industry, 133-34, 188, 215-16,248 Brault, Michel, 146, 162, 179 British film industry in Canada, 58-59, 68-69; in coproductions, 198-99, 200, 202; and quotas, 83-85, 133-34, 135; Rank Organization in, 105—8, 110-11, 117, 118; during World War I, 54, 77 British North America Act, 90 Broccoli, Cubby, 195 Brockington, Leonard W, 107 Bronfman, Charles, 246, 247, 248, 273 Bryce Commission, 114, 117 Burnin' Love, 215 Bushnell, Earnest, 136 Cabinet, 146-47, 196 Calgary, Alberta, 53, 69-70, 97, 115, 239 Campbell's Kingdom, 108 Canada: capitalist expansion in, 91-92; in colonial dependency situation, 1819, 20, 24—25; currency crisis in, 134—35; foreign investment in, 32— 33, 92-93, 254-55, 257, 267-69; and free trade policy, 251-52, 271-73; media imports in, 34-35, 38-39; protec-

322

tionism in, 34. See also American film industry in Canada; Canadian film industry Canadian Association of Motion Picture Producers (CAMPP), 22, 183 Canadian Broadcasting Corporation, 35 Canadian content regulations, 196, 214 Canadian Cooperation Project (CCP), 136-41 Canadian Educational Film Corporation Limited, 67 Canadian Film Development Corporation (CFDC), 22, 29, 42, 43, 145, 203; and coproductions, 195, 196, 197, 199; and distribution, 153, 161; first decade of, 150—52; formation of, 147-48; and majors, 148-49; profits of, 157, 158; role of, 148; and taxshelter policy, 179, 182-83, 184 Canadian Film Exchange, 53 Canadian film industry: branch plant, 133-34, 188, 215-16, 248; censorship in, 82—83; data sources on, 42— 44; and government intervention, 19-20, 22, 77-78, 102-3, 136, 137, 138, 139-41, 142-43, 146-47, 15961, 162-68, 253-54, 256-58 (see also Canadian Film Development Corporation [CFDC]; Combines law; Laws and regulations; specific province)', and independents (see Independent distributors; Independent exhibitors); internationalization of, 188-93, 214 (see also Coproductions); MCA-Cineplex Odeon dominance of, 248-50; monopolistic/competitive sectors in, 42; National Cinema Act proposal, 252-53; and public support, 30-32, 49, 51; quotas/levies in, 158-68, 252, 256, 273. See also American film industry in Canada; British film industry in Canada; Distribution; Exhibition; Production Canadian film industry, history of, 45— 78; American distribution monopoly, 67-78; early years in, 45-48; exhibition/distribution structures and policies, 51-56; expansion of Famous Players, 61—66; production in, 48—51;

Index vertical integration with U.S. industry, 56-61; in World War I, 49, 54-56 Canadian Film Institute, 44 Canadian Film Weekly, 146

Canadian Motion Picture Distributors Association (CMPDA), 163, 164, 166 Canadian National Features, 51 Canadian Pacific Railway (CPR), 48, 133 Canadian Paramount Pictures Corporation, 54 Canadian Radio-Television and Telecommunications Commission, 196 Canadian Theatres Group, 111 Canadian Universal Film Company, 68 Cannes International Film Festival, 275 Capital, 19, 34 Capital Cost Allowance program (CCA), 22, 170-79, 185, 186, 188, 202-3, 217 Capitalism, 19, 34, 91-92 Carle, Gilles, 143, 145, 179, 190-91, 213 Censorship, 82-83 Certification Office, 176 Certified feature productions, 171-79, 180-81 Chamberlin, Edward H., 41 Changeling, The, 206-7

Chatham, Ontario, 52 Chretien, Jean, 166 Cinema Act of 1983, 261-64 Cinematograph Films Act of 1927, 83 Cinepix, 183, 209 Cineplex Corporation (Cineplex Odeon), 111; in combines case, 24, 222-23, 232, 235-38; executive compensation in, 246-48, 249, 273; expansion of, 225-27, 230, 244-45; first-run allocation to, 240, 241; formation of, 22324; location strategy of, 227-29; majors' response to, 231-32; market power of, 293; and MCA, 24, 246, 248—49; moveover policy of, 225; near bankruptcy of, 232, 235, 237; obstacles to profitability, 229-30; Odeon acquisition, 243, 244; opposition to federal distribution bill, 270, 273-74; Plitt acquisition, 245, 246, 249; public offering, 230-31; specialty audiences of, 224-25; theater complex of, 223-24

City on Fire, 173

Clarkson (G.T.) Company, 62 Coca Cola Company, 255 Cohen, Ronald, 184, 235, 252 Cohen, Sidney S., 64 Cohen, Wolfe, 153 Coleman, D. C., 107 Colonial dependency situation, 17—20, 24-25 Columbia Broadcasting System, 255 Columbia Pictures, 68, 89, 118, 119, 153, 207, 232, 237, 255; coventures of, 212-13; in price-fixing suit, 128-29 Combines Investigation Act, 87, 90, 91, 92, 128, 129 Combines law: Cineplex case, 222-23, 232, 235-38; failure of, 248-50; 1976 amendment to, 233-35; 1930s case, 87-94; objectives of, 233; price-fixing cases, 128, 129 Commerce Department, U.S., 36, 43 Commission d'Etude sur le Cinema et 1'Audio-visuel, 259 Competition, in neoclassical economic theory, 40-42 Comprador role, 17-18, 24 Congress, U.S., 35, 271 Consumer and Corporate Affairs Canada, 222, 232, 253 Contract, Standard Exhibition, 85-86, 89,90 Cooper, John Alexander, 80, 82, 89, 1023 Cooper, Robert, 184 Cooper Organization, 79-87, 89, 90, 93, 102 Coproductions, 194-221; advantages to U.S. producers, 215; categories of, 195; coventures, 211-13, 214-15; cultural dependency and, 213—14; denationalizing process and, 216—21; division of labor in, 197-99, 201-2; financial dependency and, 215-16; financing, 202-10; and tax shelter policy, 195-96; treaties, 196-97 Cordelia, 213

Council of Canadian Filmmakers (CCFM), 158, 159, 160-61 Coup de grace, Le, 197-98

323

Index Courts: combines suit in, 90-94, 236-38; price-fixing suit in, 128-30; unjust discrimination suit in, 123—27 Coventures, 211-13 Cowboys Don't Cry, 216 Cox, Kirwan, 51 Cranston, Allan, 271 Crawley Films, 153-54 Crime d'Ovide Plouffe, Le, 211 Cultural dependency, 213 Cultural diplomacy, 35-39 Cultural nationalism, 142 Cultural sovereignty, 142, 256 Daniels, John H., 225 Data, sources of, 42—44 Death Weekend, 151 Demers, Rock, 188 Destounis, George P., 99, 108 Dewees, W. P., 65 Dewees Theatres, 65, 70, 74, 75, 90 Disney, Roy E., 267 Disney (Walt) Productions, 118-19, 123, 215,255,267-69 Distribution: blind-bidding policy, 243— 44; block-booking policy, 76-77, 120; of Canadian feature films, 148-49, 153-55, 159-68, 183-85; and combines law, 87-90, 222-23, 232, 23538; of coproductions, 206-10; early history of, 53—56; under federal bill, 264-67, 269-76; first-run allocation and, 240-42; of foreign films, 25859, 263; market for Canadian films, 31; monopoly by major circuits, 6978, 98-100, 108-9, 119-20, 154, 229-30, 231-32, 258-59; under National Cinema Act proposal, 252—53; playing day and date, 128; product splitting policy, 119; under Quebec's cinema act, 260-62, 263; shifts in allocation, 118-19; vertical integration of, 57-59. See also Independent distributors; Quotas Distributor quota, 133, 158-59 Division of labor, under coproduction treaties, 197-99, 201-2 Dominion Victory Loan Committee, 55 Drabinsky, Garth, 24, 206-7, 208, 210,

324

223, 224, 228, 229, 230, 231, 232, 235, 236, 245, 246, 247, 248, 249, 270, 273, 274. See also Cineplex Corporation (Cineplex Odeon) Dundas, Ontario, 76 Dunning, John, 206, 207-8, 209, 210, 212,219 Edison Company, 48 Edmonton, Alberta, 56, 97, 115, 239 Eisner, Michael D., 267 Empire Theatres Limited, 127 Exhibition: early history of, 45—48, 51— 53; independents (see Independent exhibitors); market power in, 239; mid1950s slump in, 109; in multi-screen complex, 223—24; power of circuits, 111-13; vertical integration of, 5657, 59. See also Cineplex Corporation (Cineplex Odeon); Famous Players Canadian Corporation; Odeon Theatres Exhibitor quota. See Screen quota Fairweather, Alice, 83 Famous-Lasky Film Service, 67 Famous Players Canadian Corporation: American ownership of, 60—61; in broadcasting business, 109-10; and Cineplex challenge, 231—32; and combine suit, 90-91; competitors of, 9596; and Cooper Organization, 81—82; distribution monopoly of, 68, 69-78; expansion of, 61-66; first-run allocation to, 240; formation of, 57; in franchise agreement, 58, 60; holdings of, 100, 111-12; investments of, 114-15; market power of, 239; ownership changes in, 110; Paramount control of, 87-88; relations with Odeon Theatres, 98-100, 108-10, 119-20, 154, 229; revenues of, 112-14 Famous Players Film Service, 54 Fantastica, 213 Faulkner, Hugh, 160 Femme de I'hotel, La, 190, 191 Film Act of 1927, 133 Film Act of 1938, 134 Film and Video Certification Office, 43 Filmways, 255—56

Index Fine, Sam, 105 First National, 59, 62 Fitzgibbons, J. J., 96, 98, 103, 105, 109, 135, 136-37 Footloose in Canada (Sutton), 34 Foreign Exchange Conservation Act, 134, 135 Foreign investment in Canada, 32—33, 92-93, 254-55, 257, 267-69 Foreign Investment Review Act of 1973, 254,267 Foreign Investment Review Agency (FIRA), 254-55, 256, 257. See also Investment Canada Fournier, Guy, 259, 261 Fox, Francis, 213, 214, 235, 252, 255, 256, 257, 263, 264 Fox Film Corporation, 67, 96, 99 Frank, Richard, 267 Franklin-Herschorn circuit, 124 Freedman, Ben, 70 Free trade, 251-52, 271-73, 274 French film industry, in coproductions, 197-98, 200, 201-2 Friedman, Henry, 97 Full Circle, 199 Furie, Sidney, 143

Hague, Glair, 76 Halifax, Nova Scotia, 124, 126 Hamilton, Ontario, 76, 239 Hanna, W.J.,54 Hanson, Oscar, 96 Happy Birthday to Me, 206, 207-8 Harmon, Francis, 136, 138, 139 Harnick, Harvey, 128 Hawkshaw,J. E., 83 Hays, Will H., 80, 81,89 Hays Organization, 80, 82, 88-89, 93 Heart Farm, 151 Heiber, George, 164 Heroux, Claude, 198, 206, 219 Heroux, Denis, 198, 209-10, 211, 212 Herron, Frederick L., 80 Holland, Andrew and George, 46—47 Home a tout fair e, L', 213 Home Box Office (HBO), 209, 211, 255 Horizontal integration, 91 House of Commons Standing Committee on Broadcasting Films and Assistance to the Arts, 159 Howarth, Gorse, 33 Howe, Clarence D., 135, 137, 139-40 Hubbard, R., 268 Hunter, Lawson, 222, 235

Galbraith, John Kenneth, 41-42 Gandhi, 191, 192, 195 Garrow,J.,90 Garson, A. I., 106 Gaumont-British, 59 General Agreement on Tariffs and Trade (GATT), 272-73 General Sound and Theatre Equipment Limited, 115 Gherson, Joan, 32 Girls, 201 Godin, Gerald, 262 Goin'Down the Road, 155, 189 Gordon, Donald, 136, 140 Gosselin, Bernard, 146 Gottlieb, Myron, 232, 246, 247, 248, 273 Granger, J. R., 74 Greenberg, Harold, 211, 219, 270 Grierson,John, 133, 135, 138 Guest, Frederick, 76 Gulf & Western Industries, 110

/'// Take Manhattan, 217 Independent distributors: and federal distribution bill, 270; and foreign films, 258-59, 263; numbers of, 153; in Quebec, 258-59, 263; relations with circuits, 154—55, 157; relations with majors, 153—54; and tax-shelter policy, 183-85. See also Distribution Independent exhibitors, 112, 113, 157; first-run allocation to, 242; lobby of, 100— 105; price-fixing complaint of, 128-30; relations with majors, 122; unjust discrimination complaint of, 123-27. See also Exhibition Independent Exhibitors Association of Quebec, 103 Independent Motion Picture Exhibitors Association, 103, 105 Independent Motion Pictures, 53 Independent Theatres Association, 102, 105

325

Index Informational Media Guaranty Program, 36 In Praise of Older Women, 155 Institute Quebecoise du Cinema, 261 International Telemeter Corporation, 110 Investment Canada, 43, 257, 267, 26869 Investment Canada Act, 267, 268 Irwin, Arthur, 138 Israeli film industry, in coproductions, 201 Italian film industry, in coproductions, 200,202 J'ai mon voyage, 152 Jewison, Norman, 143, 193 Johnson, Griffith, 149 Johnston, Eric, 140, 141 Jones, John Edward, 132 Jutra, Claude, 143, 146, 155, 179, 185, 198 Katzenberg, Jeffrey, 267 Kemeny,John, 198, 211 Killam, I. W., 60, 88 Kimball, R. B., 123 Kinetoscope, 46 King, Allan, 185 Kinsman, Jeremy, 265 Kitchener, Ontario, 31 Klopchik Report, 160 Knapp, Charles, 128 Koch, Ed, 249 Krim, Arthur, 255 Labreque, Jean-Claude, 146, 213 Laemmle, Carl, 53, 71-72 LaMarsh, Judy, 150 Lamy, Andre, 203 Lanctot, Micheline, 213 Langer, Joseph Frances, 65 Lauriente, A., 74-75 Laurier, Wilfrid, 92 Laws and regulations: Canadian content, 196, 214; federal distribution bill, 264-67, 269-76; Quebec's cinema act, 167, 259-64; quota, 83-85, 13334, 135-36, 159, 160, 252, 256, 273.

326

See also Combines law; Courts; Taxshelter policy LawsonJ. Earl, 107 Laxer, Barnett E., 103-5 Leach, K. M., 72 Lean, David, 192 Leblanc, Maurice, 213 Lefebvre, Don, 185 Leiber, Robert, 62 Leiterman, Richard, 185 LeSueur, R. V, 107 Levesque, Rene, 262 Levies, box-office, 159, 160 Levitt, I., 128, 129 Lewis, Ray, 104, 105 Liberty Loan films, 55 Lies My Father Told Me, 156 Link, Andre, 183 Little Kidnappers, 108 Loewy, Victor, 275 Los Angeles, California, 229, 236 Louisiana, 211 Levering, H. L., 82 Lynch, Kate, 192-93 McCabe, Michael, 179, 199 MacDonald, David, 166-67 MacDonald, Flora, 20-21, 24, 265, 266, 269, 270 MacKenzie King, W. L., 92, 93, 134 McLean, Ross, 135, 137, 138 McLean, Seaton, 216 McMullen, C. G., 128 McMullen, R. C., 102, 103, 104 McQueen, Humphrey, 32 McReynolds, Justice, 86-87 Majors, status of, 255 Man Called Intrepid, A, 185 Mankiewicz, Francis, 213 Mansfield Theatre Company, 64 Marshall, W. R., 84 Mason, Foulds, Davison, Carter, and Kellock, 89 Massey-Levesque Commission, 142—43 Masters, Haskell M., 85, 89, 97, 105 Meatballs, 183, 192,209,210 Medavoy, Mike, 255 Mel Simon Productions, 211 Merchant Ivory Productions, 195

Index Metro-Goldwyn-Mayer (MGM), 97, 98, 99,118 Ministry of Communications, 253-54, 256,268 Miserables, Les, 259 Mon oncle Antoine, 155 Monopoly: in neoclassical economic theory, 40—42; sector of economy, 41 — 42. See also Combines law ) Montreal, Quebec, 47, 64, 69, 115, 239 Morris, Peter, 44, 46-47 Morton, Henry, 96-97 Motion Picture Bureau, 133, 134 Motion Picture Exhibitors and Distributors of Canada. See Cooper Organization Motion Picture Export Association of America (MPEAA), 136, 137, 138, 139, 140-41, 149-50, 163, 164, 165, 166, 167-68, 186, 255, 256, 260, 261, 262, 263, 264, 270 Motion picture industry: under GATT rules, 272-73; market structure of, 39-40. See also American film industry; American film industry in Canada; British film industry in Canada; Canadian film industry Motion Picture Patent Company, 48, 53 Motion Picture Producers and Distributors of America (MPPDA). See Hays Organization Motion Picture Theatres Association of Ontario, 105 Move-overs, 225 Muir,J. R., 66, 84 Mulholland, W. D., 32-33 Mulroney, Brian, 21, 257, 258, 262, 271, 275 Murder by Decree, 173 Music Corporation of America (MCA), 24, 246, 248-49, 274 My American Cousin, 189—90 Nanaimo, British Columbia, 65 Nathanson, Henry L., 67, 96, 97 Nathanson, Nathan L., 57-58, 59, 60, 61, 65-66, 69, 70, 72-73, 74, 88, 95-96, 97-98, 275 Nathanson, Paul, 106

National Cinema Act, 252-53 National Council of Independent Exhibitors of Canada, 103 National Film and Video Policy, 256 National Film Board of Canada, 21, 135, 143, 144, 150, 189, 196, 197; and anticommunist hysteria, 138; and feature film production, 145, 146; formation of, 133; MPEAA campaign against, 137 Nelson, British Columbia, 65 Neoclassical economic theory, 40—41 New Cinema Enterprises, 157, 258 Newman, Archibald, 137 Night Heat, 215,216,217 Norstar, 265 Nova Scotia, unjust discrimination case in, 123-27 Nova Scotia Amusements Regulation Board, 123, 127 Nova Scotia Theatre and Amusements Act, 123 Odeon Theatres: and Cineplex challenge, 231-32; first-run allocation to, 240; formation of, 95-98; holdings of, 111 — 12; integration with Rank Organization, 106-8, 110-11, 117; market power of, 293; and ownership changes, 111, 117, 243; relations with Famous Players, 98-100, 108-10, 119-20, 154, 229; revenues of, 117 Ogdensburg Agreement, 18 Oligopoly, 40 O'Loghlin,J. P,70, 73 Ontario: combine case in, 90—91; film market in, 112; quota and levy policy in, 85, 160-61 Organization of Economic Cooperation and Development (OECD), 272 Orion Pictures, 255—56 Ottawa, Ontario, 96, 223, 227, 239 Ouimet, L. E., 47, 55 Owensmith, Blake, 137 PanCanadian Film Distributors, 230 Paramount Famous-Lasky Corporation, 55,57-58,61,64,69,87

327

Index Paramount Films Distribution (Canada), 118-19 Paramount Pictures, 53-54, 56, 57, 67, 96, 99, 109, 110, 114, 116, 118, 122, 123, 125, 183, 209-10, 232, 264, 265 Paramount Publix Corporation, 87—88 Parliament, 91, 92, 146, 147-48, 150, 233,254,257 Parliamentary Committee on Free Trade, 251 Parti Quebecois, 21, 259, 262 Passage to India, A, 192 Pearson, Lester B., 136, 141 Peck, Ray, 132-33 Pelletier, Gerard, 159 Peters, George W., 107 Pleskow, Eric, 255 Plitt Circuit, 245, 246, 249 Plummer, Christopher, 193 Plummer, George, 111 Pool, Lea, 190 Porky's, 192,211 Power Play, 199 Premier Operating Corporation, 112 Price-fixing cases, 128-30 Production: and Canadian Cooperation Project, 136-41; CCA certified, 17374, 175, 178-79, 180-81; coproductions (see Coproductions); early history of, 48-51, 133; Famous Players investment in, 115, 117; of national film industry, 22-23, 145-47, 150-52, 153, 156, 161, 171-73, 18990; 1960-1970 independent sector, 143-45; Odeon investment in, 117; by Quebec filmmakers, 143, 145-46, 152, 162^213, 259; of quota quickies, 83, 134. See also Canadian Film Development Corporation (CFDC); National Film Board of Canada Product splitting, 119 Property rights, 19

Quebec: cinema law in, 167, 259-64; cultural nationalism in, 142; filmmakers in, 143, 145-46, 152, 158, 162, 213, 259; independent distributors in,

328

258-59, 263; separatism in, 21; taxshelter policy in, 186 Quebec Allied Theatre Industries, 103 Quest for Fire, 210 Quiet Revolution, 142 Quota quickies, 84, 134 Quotas: distributor, 133, 158-59; screen, 83-85, 133-34, 135-36, 159, 160, 252, 256, 273 Rabid, 156 Raftery, Edward T, 89, 90 Ragtime Summer, 199 Rank Organization, 105-8, 110-11, 117, 123 Raymond, Marie-Jose, 264 Raymond-Roth task force, 264, 265, 270, 274 RCA, 255 Reagan, Ronald, 21, 262, 270-71 Regal Films, 57, 62, 67, 89, 90, 97, 99 Regent Theatre Company, 57 Regie du Cinema, La, 261, 262 Reitman, Ivan, 212 Restrictive Trade Practices Commission (RTPC), 24, 232-35, 236, 237-38 Richard, Clement, 261, 262, 264 Rimbaud est mort, 199 R.K.O. Distributing Corporations of Canada, 67 R.K.O. Pictures, 255 Roberge, Guy, 146, 196 Roberge Committee, 146-47, 148-50 Roberts, John, 163-64, 165, 166 Robinson, Joan, 41 Robson, Clarence, 70, 97 Rocca,JohnR, 123 Rocca Cinemas, unjust discrimination complaint of, 123-27 Rosenfield, Jonas, 269-70 Roth, Millard, 164, 259, 261, 270 Roth, Stephen, 264 Rothstein Theatres, 112 Rousson-Trudeau theatre case, 102 Rowdy Man, The, 152 Roxanne, 217 Royal Commission on Corporate Concentration, 43, 112

Index Royal Commission on National Development in the Arts, Letters and Sciences, 142-43 Running, 184, 185 Saguenay Films, 258 St. John, New Brunswick, 69, 96 Salmon, C. R. B., 117, 155 Sand des autres, Le, 211 Sarlos, Andrew, 225, 232 Saskatoon, Saskatchewan, 97 Scanners, 206, 207 Schenck, Nicholas, 98 Schiller, Herbert, 37-38 Schuberg, John, 47 Screen quota, 83-85, 133-34, 135-36, 159, 160, 252, 256, 273 Secretary of state, 146, 147, 149, 159, 160, 161, 163, 166, 179, 182; Film Policy Section, 197 Senate, U.S., 271 Separatism, 21 Shadow of the Hawk, 156 Shebib, Don, 155, 185 Sheinberg, Sidney, 246 Sheppard, Gordon, 146 Sheppard,W.J., 57 Sherman Act, U.S., 86, 236 Shipman, Ernest, 50, 51 Shivers, 151 Shultz, George P., 272 Silence of the North, 185 Silent Partner, The, 185 Sitting in Limbo, 189 Skouras, Spyros, 38, 136 Smith, Anthony, 276 Societe Generate du Cinema, 261 Space Hunter, 212-13 Specialty Film Import, 55 Spencer, Michael, 146, 149, 150, 151, 152,153, 199 Spencer Report, 198, 199 Spryfield Cinemas, 124, 125, 126 Standard Exhibition Contract, 85-86, 89, 90 Stanton, Frank, 37 State Department, U.S., 36, 138 Statistics Canada, 42

Steinhardt, Lawrence A., 138-39 Stevenson, Mickey, 184, 258 Stewart, James, 103 Strass Cafe, 190 Supreme Court, U.S., 86-87 Sutton, Horace, 34 Syndicat National du Cinema (SNC), 158 Tally, Thomas L., 47 Tanenbaum, Howard, 232 Tanenbaum, Max, 225 Tax-shelter policy, 169—93; capital cost allowance program (CCA), 22, 170-79, 185, 186, 188, 202-3; commercialization effect of, 186, 188-93; coproductions and, 195—96; and independent distributors, 183—85; and roleofCFDC, 179, 182-83, 184 Taylor, N. A., 95-96, 102, 105, 146, 147, 196, 223, 225, 230 Taylor, Percy, 77 Telefilm Canada: coventures of, 214-15; Feature Film Fund of, 214. See also Canadian Film Development Corporation (CFDC) Television, 109-10, 143, 196, 203, 209, 212,215,216,217 Theatre Confections Limited, 115 Tiffany Productions, 68 Tin Flute, The, 195 Toronto, Ontario, 54, 69, 71, 146, 224, 227,229,239 Toronto International Studios, 230 Touchstone Films, 267 Transamerica Corporation, 255 Transnational Corporations, 254—55, 257 Treaty coproductions, 195, 196-97 Tristar, 255 Trudeau, Pierre, 20, 33, 257, 258 TTI Movies Limited Partnership, 232 Tudhope,J. B., 57 Twentieth Century-Fox Film Corporation, 116, 118, 119, 153,210,211, 232,237 Uncanny, The, 199 United Amusements Corporation, 63

329

Index United Artists Corporation, 68, 86, 89, 96, 116, 118, 123, 125, 153, 232, 255; in price-fixing suit, 130 United Nations Educational, Scientific and Cultural Organization (UNESCO), 38 United States: cultural diplomacy of, 35— 39; and free trade policy, 271-73; investment in Canada, 32-33, 92-93; media exports of, 34-35. See also American film industry in Canada Universal Pictures, 118, 123, 153, 154, 184, 185,231,232,246,273 Valenti, Jack, 164, 165, 262, 263, 264, 270, 274, 275 Vancouver, British Columbia, 47, 65—66, 70,76, 122,227,239 Vertical integration, 56-61, 93, 105-8 Vestron, 275 Victoria, British Columbia, 65 Vitagraph Limited, 67 Warner Brothers, 116, 118, 123, 125, 153,232,255 Wars, The, 195

330

Wartime Prices and Trade Board, 102, 103, 105 Webb-Pomerene Export Trade Act of 1918,87 Wedding in White, 152 Weinzweig, Daniel, 265 West German film industry, coproductions of, 201 Wheeler, Anne, 216 White, Peter, 88 Who Has Seen the Wind?, 156 Why Shoot the Teacher?, 156, 189 Wiesenfeld,Joe, 216 William Morris Agency, 87 Wilson, J. A., 73-74 Wilson, Pete, 271-72 Winnipeg, Manitoba, 47, 53, 56, 69, 74, 97, 115,239 Winnipeg Manifesto, 161—62 Winters, Robert H., 138 World-class film, ideology of, 23, 188-93 World War I, 49, 54-56, 77 World War II, 102 Zahorchak, Michael, 111, 117, 244 Zukor, Adolph, 56-58, 60, 74, 88, 96

Manjunath Pendakur is Associate Professor in the Department of Radio-TV-Film and Director of the Program on Communication and Development Studies at Northwestern University. He received the Ph.D. degree from Simon Fraser University. His articles on the film industry and international communications have appeared in Canadian Journal of Communications, Cinema Canada, Communication, Media, Culture and Society, Journal of Communication and Jump Cut: A Review of Contemporary Media. The book was designed by Mary Primeau. The typeface for the text is New Baskerville and the display is Futura Extra Black Condensed. Manufactured in the United States of America.