The number ofCanadian film production companies that can qualify for public box officesubsidies is being dramatically reduced under new guidelines just issued byTelefilm Canada.

Canada'sprincipal film funding agency announced yesterday that as many as 15 productioncompanies will be eliminated from next year's roster of those receiving"performance envelope funding" for their English-language films.

As a result,only five companies will end up receiving performance envelopes, which areallocated on the basis of a company's track record at the Canadian boxoffice. Under that system every dollar that an English-language title grossesat the box office is rewarded with $1.21 in guaranteed funding from Telefilm,money that the companies can spend at their own discretion.

During thecurrent financial year as many as twenty companies benefited from such grants,which are issued through the Canada Feature Film Fund. However, Telefilm nowsays that it must "raise the bar" on eligibility in order to fulfillits goal of growing the box-office market share of Canadian films to five percent by 2006.

The Canadian filmmakingcommunity expected yesterday's higher qualification hurdles, especiallyin a year that has seen Telefilm more determined than ever to draw in localaudiences; but producers felt the sting nonetheless.

Shane Kinnear,vice-president of sales and marketing at Toronto-based production companyShaftesbury Films told Screen Daily, "Companies hoping to produce theatrical features basedsolely on Canadian public finance may have a difficult future. It'scritical to be diversified in your financing."

"This willdefinitely change our business plan," said Steve Hoban, a founder ofToronto's 49th Parallel Films, which received a 2002-2003 envelope of$400,000 and stands to be cut off next year. However, he said that heunderstood and agreed with the rationale behind the changes.

Enhancingperformance envelopes gives more greenlight potential to producers. Given thatTelefilm cannot contribute more than 50% of a production's budget, theperformance envelope allows a producer to pool Telefilm investment money andtake the risks as he or she sees fit.

"Who betterto make those bets than the people who have the track records," saidHoban. He expects to have Vincenzo Natali's black comedy Nothing in the market next year and anticipatesits box office results will lead to a renewed performance envelope two fiscalyears from now.

One industryexecutive suggested the change would consolidate production power in the handsof most influential companies, increasing the dollars available to the likes ofAlliance Atlantis and Robert Lantos' Serendipity Point Films. In2002-2003, Alliance Atlantis received over C$4.6m in performance-basedenvelopes for production and distribution. Serendipity received C$2.1m.

French-languageproducers, whose films far outperform their English-language cousins, will feelthe impact of the changes but to less blunt effect. Seven Quebec-basedcompanies will receive French-language performance-based envelopes in2003-2004, down from nine for 2002-2003. In reflection of their success, Frenchtitles receive a reward of only a C$.50 per box office dollar grossed.

In its document,Telefilm says the performance envelope changes will "ensure that onlythose films with the most distinguished box-office are eligible and there arefewer, more significant envelopes". This will mean that in order toqualify films must now be in the top 15% of the adjusted Canadian box officeand have grossed a minimum of C$1m ($640,000). In being 'adjusted',films that are co-productions or do not have total Canadian content areslightly penalised in the final calculations.

Producers canapply for Telefilm's "selective" grants but, as the agencysays in its own document, this non-performance-related subsidy is primarily aimedat those who don't have a box office track record and it is a"highly competitive and over-subscribed environment." Moreover, theselective component of the CFFF will shrink if, as is hoped, the box officegrows. "The percentage of resources allocated between the selective andperformance components is directly related to the performance of Canadian filmsat the box office. As the box office grows, so does the size of the performancecomponent."