The offices at Insight Film Studios Ltd. on West Sixth Avenue are pretty quiet these days. The warren of cubicles in the cool and dimly lit concrete building is mostly silent, save for the cheerful voice of Devi Singh, assistant to CEO Kirk Shaw, who continues to take calls at her desk outside the corner office.
Insight, Vancouver’s largest independent film production house, was crippled earlier this year when the Canada Revenue Agency (CRA) questioned a previously routine tax credit, delaying an anticipated refund. With the added pressure of lawsuits from creditors seeking payment and clients succumbing to the global economic meltdown, Insight was forced to lay off all but 20 of its 108 staff and stop initiating any new productions.
Singh ushers me into the corner office, and a remarkably relaxed-looking Shaw explains that he is over his initial anger and now considers the hiatus a welcome opportunity to review and reorganize operations. “I actually see it as a good thing,” he explains. “I didn’t at the time, but, in hindsight, just stopping and housecleaning, re-evaluating . . . in my mind everything that’s come out of this has been mostly positive.”
That re-evaluation includes walking away from his dream of running a Hollywood-style, all-in-one production studio. In the past four years, Insight has produced an average of 35 feature films a year, with a cumulative budget over that period of $500 million. Insight raised the financing, commissioned the scripts, hired the actors and managed every aspect of the production in-house. Shaw says he has no intention of dissolving Insight Film Studios and continues to work toward discharging all its obligations, but he concedes that it may simply become a holding company while he launches a new, leaner film production company under the banner Odyssey Media.
For the 53-year-old Shaw, this new enterprise represents just one more twist in a career that has seen many detours. Having started out with a journalism diploma from Douglas College, Shaw’s original aim was to become a writer, but instead he ended up on the administrative side of journalism, as part of the management that launched the tabloid Edmonton Sun in 1978. “I’m attracted to the creative side but am better at the administrative,” he acknowledges.
Returning to Vancouver in the mid-1980s, he got sidetracked in the computer business for four or five years before launching Insight in 1990 to produce self-guided audio tours for museums. Insight branched into video when the Museum of Vancouver asked him to produce a video, and Shaw began producing his own documentaries in 1994. Insight’s first dramatic feature came in 2001 when, on a shoestring budget, Shaw and his brother Keith spliced some original material into a computer game.
Shaw indicates that his new company will continue to produce films, but as “a slimmed-down business unit as opposed to a big creative company.” That would entail putting together the business plan for each production and securing the financing but contracting out the various aspects of the actual production. At the same time, Insight continues to wrap up business already underway, with Shaw expecting the company to claim another 20 films to its credit by year-end. He points to Hardwired, starring Cuba Gooding Jr., which Insight delivered to Sony on time in June, and Stan Helsing, starring Leslie Nielsen, which will be released in October.
At the heart of Shaw’s current downsizing is a dispute with the CRA over the interpretation of one part of the federal tax-credit program aimed at stimulating the Canadian film industry. According to Shaw, in March 2008 the CRA decided to tighten its method of calculating labour costs eligible for tax credits. The CRA elected to apply the tighter calculations retroactively and withhold a corresponding amount from Insight’s 2008 tax refund. As this story went to press, Insight and the CRA continued to negotiate, with Shaw expecting a resolution by early fall. While declining to specify the amount he believes the CRA owes Insight, Shaw allows that “it’s a lot of money: the amount is to be determined, and once that is determined, we can move on.”
At the same time, Insight is facing lawsuits from at least two companies seeking payment of alleged debts from Insight. Shaw declines to comment on these pending lawsuits, citing instruction from his lawyers.
Meanwhile, Shaw says Insight is also having trouble collecting money from companies that have been hit hard by the global recession. He points to $850,000 that Insight is unlikely to collect from a Russian distributor and $1.5 million owed by Super Channel, the Canadian cable network that in July filed for protection from creditors under the Companies’ Creditors Arrangement Act.
While other Vancouver film producers decline to comment about the CRA on the record, one local film executive commiserates, saying that arbitrary decisions from the tax agency can be devastating in an industry that depends on tax credits for its survival. “It just creates this uncertainty,” the executive says. “The problem is that they change their minds without any notification, and they ding you retroactively. If they were just to give notice that, as of this day, this is how our interpretation is going to be, then you just adjust your business model.”
However, another executive, Shawn Williamson, a partner at Brightlight Pictures, doesn’t believe Insight’s beef with the CRA has broader implications for the local film industry. “Kirk Shaw’s issues are issues that are specific to him,” says Williamson. “What he’s talking about is CRA, which is a national agency, and there isn’t an industry-wide issue about that.” In contrast, Williamson points to Ontario’s recent decision to significantly boost its tax incentives as one issue that has raised a unanimous cry from the local industry. (Williamson spoke with BCBusiness by phone from Ontario, where he was in discussions aimed at moving Brightlight’s operations to Ontario, leaving only its administrative offices in Vancouver.)
Back in his office, Shaw reflects on the vagaries of the film business, where business plans are sometimes as illusory as Hollywood stardust. He says he realized soon after launching Insight that the Canadian film industry is unlike traditional manufacturing sectors, where a company makes a widget, then takes it to market and tries to sell it. “The first lesson I learned was that [a film] is worth more on paper,” he explains. “You sell it before it’s made, so by the time you make it you’ve covered everything financially.”
And the key ingredient to pre-financing a film, he continues, is tax credits. “I actually have 25 or 30 per cent of the budget already because of tax credits. So I can sit down and say, ‘Well, I already have this much money; how do I put the rest of it together?’ ” Shaw says the film industry depends on these incentives for its survival, adding that the provincial and federal governments have done an excellent job of creating a tax-credit program that works. “It’s an industry that needs that subsidy, that soft money, if you want to develop it and grow it.”
While the past few months have taken a toll on Shaw and his family, he says he’s now looking forward to getting closer to his creative roots with Odyssey Media. “In the big studio model, I was getting torn into managing the casting team, managing the post team, managing the truck and transport team. I was drained trying to hold everything together,” Shaw explains. “Where there was probably 10 per cent of me left for the creative project before, I can claim some of that back.”