Canadian Spirit

Andy Fry surveys the latest developments in Canada, from regulatory changes to consolidation in broadcasting, production and distribution.

The Canadian kids’ TV business has always punched above its weight. A combination of strong governmental support and sure-footedness on the international stage has fostered a production and distribution ecosystem in which creativity, innovation and entrepreneurship thrive.

In getting an idea of the overall value of kids’ and youth production in Canada, the best figures come from the Canadian Media Production Association, which puts the total at C$352 million ($265 million) in 2013–14. This is up from C$317 million ($239 million) in 2012–13.

But this isn’t to say that the Canadian kids’ industry is without its challenges. Just like their counterparts in other countries, the key players have had to contend with disruption caused by changes in ownership, regulation, digital technology and audience behavior.

The big story in the last couple of years has been consolidation in the kids’ broadcasting business. Leaving aside CBC (the national public broadcaster), Quebec-based French-language players and the publicly-funded channel TVOntario (TVO), there are now only two kids’ broadcasters of significance in the Canadian market: Corus Entertainment and DHX Media. Both companies have substantial TV production divisions, which inevitably raises questions about the commissioning opportunities for third-party producers.

CANADIAN TREEHOUSE
Corus is the biggest beast in the Canadian jungle, with a portfolio that includes YTV, Treehouse, TELETOON, Nickelodeon, Cartoon Network, Disney Channel and Disney Junior. In any other country in the world, at least half of these channel brands would be competing with each other. But laws designed to protect Canadian culture from U.S. encroachment dictate that Nickelodeon, Cartoon Network and Disney can only operate in Canada by licensing their brands to a domestic player, in this case Corus.

At first, this gives the portfolio the appearance of duplication. But, Colin Bohm, the executive VP and head of Corus Kids, says, “It’s a lot of channels, but we have set them up to target each stage of a child’s development and to provide numerous different family viewing options. For example, Treehouse and Disney Junior are both preschool but target different age bands, and we are repositioning TELETOON to hit a younger audience, 5-to-8s, who aren’t quite ready for the more sophisticated offerings of the older channels. Then we get into a mix of brands that offer a range of shows to target different moods, stages of development and, where appropriate, gender.”

Corus’s Disney, Nickelodeon and Cartoon Network resemble their cousins in the other markets, “but they have been adapted to suit Canadian rhythms,” says Bohm. “Of course you will see a lot of the same shows, but there are idiosyncrasies around viewing times, seasonal audience behavior and cultural nuances that we take into account.”

ROOM FOR INDIES?
When asked about the impact of Corus’s clout on Canadian kids’ indies, Bohm argues that there are good regulations in place to protect producers. “There are rules that govern how much home cooking we can eat,” he says. “75 percent of our spend on Canadian scripted content has to go to indies, which means players like Thunderbird Films, 9 Story Media Group and Breakthrough Entertainment are important partners for us. Besides, we don’t have a monopoly on great ideas, so it wouldn’t make sense to source everything in-house.”

YTV, for example, has indie shows such as Some Assembly Required (Thunderbird) and Max & Shred (Breakthrough), while TELETOON airs 9 Story’s Camp Lakebottom. “Preschool is different because this is an area of excellence for Nelvana, so Treehouse tends to rely mostly on shows from the studio,” Bohm says.

From Bohm’s perspective, consolidation isn’t about squeezing suppliers; it’s about protecting his business from its own competitive and regulatory challenges. “With all the changes we’re experiencing, scale in kids is a no-brainer, because it helps us build a stronger relationship with cable platforms, advertisers and audiences.”

The changes affecting Corus are due in part to the current shift to on-demand and multiscreen viewing. “But there are regulatory changes too,” he says. “The CRTC [Canadian Radio-television and Telecommunications Commission] is relaxing rules on genre, which means there may be more competition between channels. And there is also a discussion around ‘pick and pay,’ which will give consumers more freedom in terms of the channels they choose to buy.”

KIDS ON DEMAND
Corus is responding to this change in a number of ways, says Bohm. “We launched a TV Everywhere app for Treehouse in June and will extend that across all our channels by the end of the year [so audiences can watch across all devices]. We are also investing more in channel-branding events, such as summer road shows, and we are placing greater store on shows that can encourage family viewing. For example, we have commissioned live-action TV movies Anne of Green Gables (from Breakthrough) and Bruno & Boots: Go Jump in the Pool! (Aircraft Pictures) for YTV.”

Of course, all of this only relates to Corus’s activities in Canada—its production and distribution arm, Nelvana, is a supplier of kids’ content to the global marketplace.

The Corus model is similar to that at DHX Media, which Steven DeNure, its president and COO, likes to think of as “an international company based in Canada,” rather than a purely domestic outfit.

DHX, through an aggressive acquisitions strategy, has seen it expand its Canadian production capabilities, transform itself into a broadcaster and become one of the world’s largest kids’ content distributors (it currently has around 11,000 half-hours in its library).

On the broadcast front, DHX acquired Family Channel, an opportunity that opened up after a cable company mega-deal triggered a series of channel divestments to comply with regulatory ownership rules. Under the old setup Family Channel was heavily reliant on Disney content. But Corus acquired the rights to Disney’s content as part of the market shake-up. This left the DHX-owned Family Channel with a gaping hole in its programming lineup.

DeNure, however, is comfortable with the way things have panned out. “The Family Channel is a great, strong brand in Canada…[it’s] the highest-rated kids’ channel. The Disney shows airing on the channel were very expensive and not necessarily the highest rated. So we didn’t think it made economic sense for us to continue with them.”

While Corus boasts an eclectic array of channels, DHX has decided to build a multichannel portfolio around the Family brand, says DeNure. The English-language Family Jr. and the French-language Télémagino target preschoolers. Family CHRGD will cater to the 6-to-12 set with animation and live-action content.

OPEN SCHEDULES
DHX’s in-house production arm and Canadian indies will be the beneficiaries of this increased capacity and the departure of the Disney shows, continues DeNure. “There will be a significant ramp-up of new content commissions. For DHX, that’s good news, because we want to be in the business of creating and owning content. And for indies it means there are more schedule slots for which they can compete.”

DeNure says Family Channel is an enthusiastic commissioner of indie content, irrespective of the regulatory requirements placed on it. “Look at a show like Temple Street Productions’s dance drama The Next Step, which has been a big hit for us. That has now been commissioned for a fourth season, and we have also commissioned a spin-off called Lost & Found Music Studios.”

The performing arts is such a hot topic with tweens that the channel has even greenlit a third series in this subgenre, says DeNure. Backstage from Fresh TV—due for launch in spring 2016—is a 30-episode, half-hour drama series set at a fictional school for the arts and features dance, instrumental and vocal performances from the cast. Other original commissions include season four of Slugterra (produced by Nerd Corps, now part of the DHX family), season two of Gaming Show (In My Parents’ Garage), season three of Justin Time and a new series called Fangbone!

BUYING TIME
There is no way, of course, that Canada-based original commissions could replace the entire Disney pipeline, so Family Channel has signed a multiyear agreement with Mattel that will bring brands like Barbie, Monster High, Hot Wheels, Thomas & Friends and Bob the Builder to its channels. It has also acquired the CBBC commission Hank Zipzer and Nowhere Boys from Australia, and signed a development and production agreement with DreamWorks-owned AwesomenessTV, which will create content for the channel. The channel also licensed three current AwesomenessTV series: AwesomenessTV, Make Me Over and Cheerleaders.

While DHX Television is now a key component of DHX Media’s business, the company is best known as a production and distribution behemoth. Original and acquired brands Yo Gabba Gabba!, Caillou, Teletubbies, In the Night Garden, Inspector Gadget, Johnny Test, Slugterra and Degrassi have made DHX a leading provider of content internationally. The relaunch of Teletubbies is a high priority, says DeNure.

“We expect there to be a lot of interest. The new version produced by Darrall Macqueen in the U.K. looks fabulous. We’re also very excited by Make It Pop, which was a hit right out of the gate for YTV in Canada and Nick internationally.”

The fact that Make It Pop is on YTV is interesting, says DeNure, because it shows that Corus and DHX are able to both collaborate and compete. “We also make Inspector Gadget for TELETOON,” a Corus channel, he adds.

DHX has also prioritized SVOD and AVOD, securing content deals with platforms around the world. Its YouTube channels generate 330 million views per month with new and existing kids’ content, says DeNure. The video platform also provided the inspiration for Banger Films’ Gaming Show, which makes YouTube gaming reviews the spine of a TV show.

STAYING INDEPENDENT
Canadian indies, forged in the furnace of the international kids’ market, are not unduly worried by broadcaster consolidation. While they acknowledge the importance of the funding and protection they receive domestically, most Canadian kids’ indies believe their ability to navigate the global market explains the success of the industry.

Vince Commisso, the president and CEO of 9 Story Media Group, is adamant that “the economics of this business mean content has to work for the international market. Through our distribution activities, we get information about what is working and what isn’t internationally, and then we factor that into our production and development activities.”

This approach has reaped rewards in terms of domestic commissions and international sales. Camp Lakebottom, an animated series on TELETOON, has sold to various international Disney channels as well as ABC TV (Australia) and Super RTL (Germany). Numb Chucks, another animated series on YTV, has aired on Cartoon Network (U.S. and Latin America), Disney (Central and Eastern Europe, Asia, Israel and Benelux) and CANAL+ Family (France and Africa). There have been similar successes for other recent shows such as Cache Craze, Daniel Tiger’s Neighbourhood and Nerds and Monsters. Nerds and Monsters, for example, was one of three 9 Story series licensed to U.S. streaming service Hulu this summer.

While the company is probably still best-known for its activities in the 6-to-11 age group, 9 Story has had growing success in the preschool market. Peg + Cat, a co-production with The Fred Rogers Company that airs on PBS in the U.S., has been sold to 180 territories, says Commisso, while Daniel Tiger’s Neighbourhood has been licensed into Asia and Latin America. “And we’ve just acquired the rights to Loren Long’s best-selling children’s book series Otis the Tractor, which we are currently developing as a preschool TV series,” he adds.

BRAND PLANS
Having increased its production and distribution capabilities—including the acquisition of CCI Entertainment’s kids’ library—a priority for 9 Story now is to beef up its licensing capabilities, says Commisso.

“We like to do everything in-house because it takes the guesswork out of the process. We have script-to-screen covered, but now we’re looking to expand our L&M activities.” However, this doesn’t mean he is planning any lavish corporate acquisitions. “For the most part we’ve grown in a measured, organic way, and that’s what we intend to do with licensing. We would consider strategic M&As, but we’d have to be sure that what we acquire complements our existing business.”

This echoes the situation at Breakthrough, which has built a formidable slate without making any aggressive expansion moves.

“We’ve kept our feet firmly on the ground,” says Ira Levy, executive producer and partner at the company. “We’ve always seen ourselves as a creatively driven company that focuses on attracting the best talent. Rather than going public, we nurtured creative partnerships.”

In addition to Max & Shred and Anne of Green Gables, other key Breakthrough shows include The Adventures of Napkin Man (CBC), Rocket Monkeys (TELETOON), Science Max: Experiments at Large (TVO) and My Big Big Friend, a co-production with 2D Lab in Brazil that is a top-rated show on Treehouse.

“We are working with writer Margaret Atwood on a 26×11-minute preschool animation series for the CBC, loosely based on a series of books she created called Wandering Wenda & Friends,” adds Joan Lambur, executive producer for animation and kids’ live-action and family programming, on what’s coming up from Breakthrough. “We have also teamed up with much-loved Canadian poet Dennis Lee on Melvis and Elvis, another book-based property about a giant monster girl and an elf.”

Breakthrough has kids’ properties targeting various demos, both live action and animation, notes Lambur. “We want to cover all bases, but we don’t want too much volume, because we are looking to raise the bar on quality all the time.” Levy believes this emphasis on creativity and quality is the best protection against changes in the market.

“Consolidation is just a fact of life,” Levy says. “And I try not to get too sidetracked by what is happening in terms of new digital platforms. The platforms may change, but kids still want to watch great stories. Our slate shows that we have done a good job of reinventing ourselves and that we continue to attract new creative talent. We actually feel like we’re at a pretty awesome moment in which our hard work is paying off.”

In response to the changes in the marketplace, Shaftesbury has been diversifying its slate. Ryan St. Peters, its VP of kids and family, notes, “We’ve always been strong in tween and teen live action, but now we are developing a portfolio that also includes preschool and animation.”

Shaftesbury’s big preschool news is the launch of The Moblees on pubcaster CBC. The company is also continually committed to live-action teen and tween content, he adds, in the shape of Super Duper Deelia, about a girl who inherits a series of superpowers when she is 11.

FUNDING MECHANISMS
While consolidation has caused some ripples in the industry, Canadian producers have the opportunity to receive support from a variety of government mechanisms.

These include tax incentives, co-production treaties, Canadian content quotas and various regional and national funds. The most important of the latter is the Canada Media Fund (CMF), which feeds millions of dollars into the Canadian content market every year. For example, “The CMF is committing C$375.2 million ($283 million) to support Canada’s TV and digital media industry in 2015­–2016,” says CMF’s president and CEO, Valerie Creighton. “Typically the CMF will provide around 20 to 25 percent of the budget for a CMF-supported kids’ show, which we see as one of our most important genres. We like the fact that this genre can be evergreen and travels well.”

The CMF’s goal is to “guide Canadian content toward a competitive global environment by fostering industry innovation, rewarding success, enabling a diversity of voices and promoting access to content through industry and private-sector partnerships.” Its budget is provided by the central Canadian government and the five biggest cable companies (which are subject to a formula based on their overall revenues), says Creighton. “The money is triggered by a broadcast licence. As soon as a Canadian show is commissioned, it becomes eligible to receive an award from the Fund.”

Creighton continues, “The process is always led by the producer. As long as they meet the Canadian content requirements and lay out their plans for some digital brand extensions, then they will be eligible for their payment.”

In terms of international success, the CMF tracked its shows in 2013–2014 and found that, of 31 CMF-funded projects sold internationally across six continents, 35.4 percent were in the children’s and youth genre, 45.1 percent were drama projects, 12.9 percent were documentary and 6.4 percent were variety and performing arts. The U.S. was the top buyer, followed by Sweden, Switzerland, Turkey and the U.K.

The CMF’s status is protected by the government, so there is no chance of it being abolished in the near future. But there is one concern, says Creighton. “As on-demand viewing grows and more consumers start to cut the cord, we are projecting that cable revenues will decline, [which will have] a negative impact on the CMF. The new platforms don’t have to contribute, so it is an issue for the industry.”