Why are so many movies shot in Canada?

The numbers behind the industry.
Feb. 13 2006 2:51 PM

Northern Expenditure

Why are so many movies still being shot in Canada?

Illustration by Mark Alan Stamaty.
Click image to expand.

Heeding the siren call of the wild in the form of a plummeting Canadian loonie, Hollywood moved north during the last decade, outsourcing to Canada no fewer than 1,500 film and television productions. Producers found that Vancouver could double for middle America, Toronto could stand in for New York City (especially if the director avoids wide shots), and Calgary can pass for the American West. At times, however, some script adjustments were required to accommodate the cold reality of the North. For example, in Final Destination 3, which was filmed in British Columbia, the climactic attack was supposed to occur during an outdoor party on the Fourth of July, but since it was not feasible to have actors wearing summery clothes during Vancouver's chilly spring, the holiday was changed to the town's "Tricentennial Celebration." But for Hollywood's illusion-makers, who have lots of experience in geographically deluding audiences, the northern exposure presents few problems that can't be overcome.

Even though Canada has spectacular settings, it's not the production values that film producers go there to find. The lure is, in a single word, money. In Southern California, the studios have highly efficient soundstages and an abundance of skilled technicians, but the unions' work rules make it extremely expensive to shoot exteriors. For example, a production can shoot for only 14 hours a day with normal overtime and then must pay double time. It also must employ redundant Teamster drivers to chauffeur actors to and from locations (even if they have their own drivers). These costs run even higher for independent producers—about 9 percent on average—who are not part of the National Term Agreement that the studios have with the unions. As a result, the indies need Canada—or another deeply discounted country.

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In Canada, producers still have unionized labor to contend with, but they get a huge discount—in the late 1990s, it was as high as 35 percent—by paying labor in Canadian dollars. On top of that, the Canadian Federal Government provides foreign producers with a subsidy called the Film Production Services Tax Credit, which now equals 16 percent of the Canadian labor costs. (It was recently raised from 11 percent to offset a rise in the Canadian loonie against the American greenback.) Also, British Columbia offers an additional 18 percent rebate on labor from that province. Finally, there is a 20 percent break on digital effects, if they are done in Canada. In order to qualify for this tax credit, either the director or the screenwriter and one of the two highest paid actors must be Canadian, which might partly explain the demand for Canadian actresses such as Rachel McAdams and Alexz Johnson, the star of Final Destination 3. *

Hollywood studios, however, are limited in their ability to take advantage of the Canadian El Dorado by the wishes of attached $20 million-plus stars and the rigidly fixed release dates for productions. Terminator 3: Rise of the Machines, for example, had been initially budgeted to be shot in Vancouver, where the producers could score a multimillion-dollar (salable) tax credit, but after Arnold Schwarzenegger expressed a preference for staying closer to home and Warner Bros. locked in a July 4 release date, the production was moved to Los Angeles. (The change turned out to be fortuitous for Schwarzenegger, who, as governor, is now taking a principled stand against runaway movie production.) Indie producers, on the other hand, are less constrained in this regard and are free to run away to Canada—or wherever the subsidy is greener.

Canada's allure is, of course, relative. The loonie has been increasing in value against the dollar during the Bush years, which in turn reduces the discount for shooting American film productions in Canada. In addition, other locales, including New York City, Louisiana, New Mexico, and Georgia, are now offering incentives to productions in the form of subsidies and tax rebates that compete directly with the Canadian ones. And as one indie producer put it: "Movies, like ladies of the night, go where the money is." Not to be outdone in the escalating incentive war, Canada jacked up its salable tax credits another notch this year. All this, of course, is good news for the survival of the hard-pressed movie producer.

Correctio n, March 3, 2006: An earlier version of this piece mistakenly included Alison Lohman as part of this list of Canadian actresses. Ms. Lohman is not Canadian; she is American. (Return to corrected sentence.)

Edward Jay Epstein is the author of The Big Picture: The New Logic of Money and Power in Hollywood. (To read the first chapter, click here.)

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