Canada’s digital media industry in dire need of funds

The interactive digital media industry in Canada is growing rapidly, but sustaining this trend in the face of limited public investment is a big challenge.

The issue was vigorously discussed by participants in a panel titled “Financing the Future: Raising Capital in Uncertain Times.” The panel discussion, organized by Interactive Ontario, was held in Toronto last week.

Interactive Ontario is a non-profit industry trade organization dedicated to the growth of the Ontario interactive digital content industry. It represents more than 200 interactive digital media companies and stakeholders including game developers, mobile content producers, e-Learning companies, education / training institutions, broadcasters, unions and guilds
 
While Canada is a world leader in interactive content development, the question is how to make this business more sustainable, said panelist Charles Zamaria, financial director for the Bell Broadcast and New Media Fund, Independent Production Fund and COGECO Program Development Fund.

Studies indicate use of online media among Canadians is very high. For instance, nearly all Canadian youth use the Internet, while 22 per cent of seniors engage in social networking online.

And yet, while Canada invests $2 – $3 billion in traditional media, only $14 million is put into new media.

Other panelists noted that the current financial crisis is undercutting what digital media leaders are trying to do.

Right now, there’s a demand for content across different media channels, suggested Jody Shapiro, a filmmaker and photographer with his own production company, Everyday Pictures Inc.

This was not necessarily the case in the past.

For instance, Shapiro said years ago, when working on films such as The Red Violin with Rhombus Media, no one was thinking about new media.  

But now broadcasters and audiences are looking for more. “It’s almost the first thing that people ask when you pitch them.”  

This demand for programs delivered via disparate media channels is producing significant business changes, panelists noted.

For instance, they said a new media component is now required at the very beginning of a deal.

The role of producer has changed, according to Mark Bishop, partner and producer with Toronto-based content creation firm, Marble Media Inc.

He said it’s now necessary to educate the broadcaster on what’s compelling interactive content. And that in turn requires the broadcaster or third-party distributor to be on board.

Marble Media has created such programs as “This is Daniel Cook” and “This is Emily Yeung,” the live-action children’s series and companion Web sites, where pre-schoolers can go online to interact with digital content.

“This is Daniel Cook” is one of the most successful projects ever funded by Telefilm Canada – it has been broadcast in 90 countries, dubbed in 14 languages, featured on Oprah and resulted in several book deals.

“At the end of the day, it takes investment to build and grow an industry,” said Bishop.

Other Canadian success stories include Club Penguin, a virtual world where children play games with their friends in the guise of penguin avatars – which Disney dished out $600 million for. And the investment in Flickr (originally designed as a game) – funded by the Canada New Media Fund – was repaid in one lump sum.

All this innovation in the area of interactive content development could be negatively affected by a funding cut, however.

Within the industry itself there have been initiatives to identify new sources of funding.

For instance, Groove Media Inc. in Toronto started out as a financer of content creation, but the retail environment started to aggregate, so it spun out a development arm called Bedlam to go after financing from bigger players.

Today, Bedlam has been credited on more than 20 games including Grand Theft Auto: San Andreas.

Funding development isn’t viable anymore, said Trevor Fencott, managing partner and CEO of Bedlam.

The company now gets 25 per cent of its funding from provincial and federal tax cuts. But, he added, a $14 million investment generated $1 billion, and he doesn’t understand why government isn’t looking at those numbers. “Those metrics are scaleable,” he said. “Those investments do pay dividends – it’s quantifiable.”

But developing such games requires knowledge workers with a great deal of expertise – and these are the people Bedlam courts. “These are highly skilled, high-paying jobs that we’re keeping here,” he said. “Otherwise they’d run off to Seattle and hang with Bill Gates.”

Shapiro recently worked on My Winnipeg, a feature film that played in 80 different film festivals, including the Toronto International Film Festival. It also played for eight weeks in the U.S. “People talk about arts cuts,” he said. “These subsidies allow you to get out there and sell your stuff.”

It’s easy to characterize these meetings as cocktail parties, said Fencott. But there are 14 large players in the video game industry and only two decision-makers – one in L.A. and one in Tokyo. “If you don’t go there, they’re not going to come to you,” he said.

“Where isn’t work accomplished over a cocktail party? We actually get a lot of business done, funny enough,” said Fencott. “We are selling the brand of Canada. We have to be there, we have to play.” It’s a relationship business, added Bishop. “We’re competing with every other country out there.”

Shapiro from Everyday Pictures recently developed content for mobile phones, called Green Pornos, about the sex lives of insects. He met with cell phone content distributors, who talked about distributing content all over the world – but didn’t have any money to pay for it.

“The problem is the only people paying for this stuff are broadcasters,” said Shapiro. “It’s a new canvas to work with. Cell phone providers haven’t figured out how to make money off this yet.” But, he added, they can’t just recycle content, because the media won’t evolve until you do something original with it.

“We’re funding content, not TV,” said Bishop. Broadcasters can be partners, he said, to co-pitch sponsors in order to develop online and mobile content.

His company also uses viral marketing – small, low-cost initiatives launched online – such as going on blogs and doing reviews. “Don’t give away interactive content for free,” he said. The company works on interactive content for international co-productions, and it’s working directly with advertisers as partners to integrate content across all platforms.

But so much time is spent lobbying for funds, there’s a need for stability, he said, and for government to make that commitment to longer-term funding. “It’s a small investment for huge economic impact in terms of job creation,” he said.

It’s also about promoting Canada as a knowledge nation. “You can’t measure the impact of a cultural ID on the world,” said Shapiro.

“Without that, everything will suffer.”

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