Written By Sarah Donnelly

As I write this, Hou Hsiao-hsien has just won best director at The Cannes International Film Festival for his martial arts film The Assassin, a Taiwan-Hong Kong-China co-production starring Shu Qi. It was called the most beautiful film of the year by critics at the festival. Now time will show if such high-profile praise will translate into box office profit.

As the film industry continues to evolve quickly, it offers high risk for possible big returns. In many ways it is a mixture of shrewd marketing, research, good timing, and a lot of luck. Part artistry, part gambling, it is one of the most creative and exciting industries to be involved in.

There are ways one can lessen the exposure to risk, but history has shown many times that films with big budgets and star-studded casts have been box office duds, while low budget movies with virtual unknown actors have gone on to become sleeper hits with little to no marketing. Good writing and directing usually help, and there are some historically successful ways to mitigate risks- 3D action movies and franchises tend to do better than art house films-but many of these models no longer apply.

As more and more content is consumed online, on devices, and box office numbers continue to plummet (at the time of this writing the U.S. Memorial Day box office, historically one of the year’s most profitable weekends, had its worst showing since 2001 and is down 39 percent over two years ago) it is the innovators that will ultimately survive and thrive.

For a firsthand perspective on the industry, Caifu Magazine spoke to Sean Patrick O’Reilly, CEO and founder of Arcana Films, based in Vancouver. Since its launch in 2004, Arcana has established itself as a successful entertainment company producing engaging storytelling with compelling art. In addition to film, it is a leader in the development of intellectual properties across all platforms and publishes thousands of comic books and over 300 graphic novels. Arcana’s library of wholly owned intellectual properties contain well over 5,000 characters and one of the world’s largest libraries of graphic novels.

“I have approached the film industry in a 'sell first, build second’ model,” says O’Reilly, “The first question I would ask prospective investors to ask me, and others, is who has committed to pre-sales of the project? I would then quickly follow up with how much is presold, how much would come from tax credits and present a “guaranteed scenario” along with one that has risk which would be mitigated through overages on minimum guarantees. To be very honest, our company has a lot of intellectual property so we do not have to pay rights fees, additional producer fees and we own everything. This 'vertical distribution’ allows us to remain in control during production, and can further reduce costs as we do not make unnecessary creative changes and can balance creative decisions with production constraints. We are profitable, sell before we build and we take very few risks with the IP we already own and have established in print publishing. We are a low risk, high yield investment that will be around for many years to come.”

According to O’Reilly, diversification is a key component. “In 2012, Arcana opened an animation division to develop and produce its content for all platforms including film, television, direct-to-home and digital media. This extension of our comic book characters has provided new merchandising vehicles across all retail product lines. By combining our commercialization strategy with our extensive storytelling, packaging, and corporate management abilities, we seek to build a strategically diversified and profitable character-based entertainment business. Arcana has the experience of animated production, a top notch team to execute a plan and is a Canadian company that receives tax credit benefits for content production as well as research and development.”

Arcana’s first animated TV series, Kagagi, aired in Canada in 2015 and its first animated feature film, Pixies, opened in U.S. theatres June 5th. Both the 13 x 22 minute TV series and the animated feature film came from two of the company’s comics and graphic novels. Arcana is in production on its next animated feature film, Howard Lovecraft & The Frozen Kingdom that is scheduled for an October 2016 release.

British Columbia remains an exceptionally good place to do business in the film industry for many reasons. The strategic location, mere hours from Hollywood mean that many established studios set up shop here decades ago. The historically lower Canadian dollar and many government tax incentives have also kept the region attractive, which has in turn boosted the level of talent attracted to the region to rival that of Los Angeles and New York. It is, in fact, the third biggest production centre in North America.

Richard Brownsey, CEO of Creative BC believes the region offers great investment opportunities in film and beyond.

“I think there is opportunity for Chinese companies who wish to invest in BC companies. That’s particularly true in the digital space for companies who wish to make direct investment as well.”

British Columbia represents a really remarkable opportunity for Chinese companies that wish to establish a north American beachhead for the distribution of, or creation of movies for international audiences,” he adds.

“It’s a very, very welcoming business environment here. We have programs that exist under the authority of the international financial act which makes the international distribution of content out of Vancouver very, very cost appealing.”

As of March 31, 2015, B.C.’s film and television industry hit an estimated record $2 billion.

(The official figures have not yet been released but Creative BC has confirmed the industry’s production value hit $1.84 billion for the first 11 months of the fiscal year.)

Value of film and TV production in B.C.

2003 $1.4 billion

2004 $801 million

2005 $1.23 billion

2006 $1.23 billion

2007 $943 million

2008 $1.21 billion

2009 $1.32 billion

2010 $1.02 billion

April 1/11 – March 31/12 $1.34 billion

April 1/12 – March 31/13 $1.48 billion

April 1/13 – March 31/14 $1.45 billion

April 1/14 – March 31/15 $ 2 billion (estimated)

Source: Creative BC & BC Film Commission

Note: Year-end changed to March 31 as of 2012.
February 1, 2011. Vancouver, BC. Sean O’Reilly
Founder/C.E.O., Arcana Studio, has an animation/comic/graphic novel business. Here he is in his Burnaby Studio. Portrait for top 40 under 40. Photo: Laura Leyshon for the Globe and Mail
Written By Sarah Donnelly

As I write this, Hou Hsiao-hsien has just won best director at The Cannes International Film Festival for his martial arts film The Assassin, a Taiwan-Hong Kong-China co-production starring Shu Qi. It was called the most beautiful film of the year by critics at the festival. Now time will show if such high-profile praise will translate into box office profit.

As the film industry continues to evolve quickly, it offers high risk for possible big returns. In many ways it is a mixture of shrewd marketing, research, good timing, and a lot of luck. Part artistry, part gambling, it is one of the most creative and exciting industries to be involved in.

There are ways one can lessen the exposure to risk, but history has shown many times that films with big budgets and star-studded casts have been box office duds, while low budget movies with virtual unknown actors have gone on to become sleeper hits with little to no marketing. Good writing and directing usually help, and there are some historically successful ways to mitigate risks- 3D action movies and franchises tend to do better than art house films-but many of these models no longer apply.

As more and more content is consumed online, on devices, and box office numbers continue to plummet (at the time of this writing the U.S. Memorial Day box office, historically one of the year’s most profitable weekends, had its worst showing since 2001 and is down 39 percent over two years ago) it is the innovators that will ultimately survive and thrive.

For a firsthand perspective on the industry, Caifu Magazine spoke to Sean Patrick O’Reilly, CEO and founder of Arcana Films, based in Vancouver. Since its launch in 2004, Arcana has established itself as a successful entertainment company producing engaging storytelling with compelling art. In addition to film, it is a leader in the development of intellectual properties across all platforms and publishes thousands of comic books and over 300 graphic novels. Arcana’s library of wholly owned intellectual properties contain well over 5,000 characters and one of the world’s largest libraries of graphic novels.

“I have approached the film industry in a 'sell first, build second’ model,” says O’Reilly, “The first question I would ask prospective investors to ask me, and others, is who has committed to pre-sales of the project? I would then quickly follow up with how much is presold, how much would come from tax credits and present a “guaranteed scenario” along with one that has risk which would be mitigated through overages on minimum guarantees. To be very honest, our company has a lot of intellectual property so we do not have to pay rights fees, additional producer fees and we own everything. This 'vertical distribution’ allows us to remain in control during production, and can further reduce costs as we do not make unnecessary creative changes and can balance creative decisions with production constraints. We are profitable, sell before we build and we take very few risks with the IP we already own and have established in print publishing. We are a low risk, high yield investment that will be around for many years to come.”

According to O’Reilly, diversification is a key component. “In 2012, Arcana opened an animation division to develop and produce its content for all platforms including film, television, direct-to-home and digital media. This extension of our comic book characters has provided new merchandising vehicles across all retail product lines. By combining our commercialization strategy with our extensive storytelling, packaging, and corporate management abilities, we seek to build a strategically diversified and profitable character-based entertainment business. Arcana has the experience of animated production, a top notch team to execute a plan and is a Canadian company that receives tax credit benefits for content production as well as research and development.”

Arcana’s first animated TV series, Kagagi, aired in Canada in 2015 and its first animated feature film, Pixies, opened in U.S. theatres June 5th. Both the 13 x 22 minute TV series and the animated feature film came from two of the company’s comics and graphic novels. Arcana is in production on its next animated feature film, Howard Lovecraft & The Frozen Kingdom that is scheduled for an October 2016 release.

British Columbia remains an exceptionally good place to do business in the film industry for many reasons. The strategic location, mere hours from Hollywood mean that many established studios set up shop here decades ago. The historically lower Canadian dollar and many government tax incentives have also kept the region attractive, which has in turn boosted the level of talent attracted to the region to rival that of Los Angeles and New York. It is, in fact, the third biggest production centre in North America.

Richard Brownsey, CEO of Creative BC believes the region offers great investment opportunities in film and beyond.

“I think there is opportunity for Chinese companies who wish to invest in BC companies. That’s particularly true in the digital space for companies who wish to make direct investment as well.”

British Columbia represents a really remarkable opportunity for Chinese companies that wish to establish a north American beachhead for the distribution of, or creation of movies for international audiences,” he adds.

“It’s a very, very welcoming business environment here. We have programs that exist under the authority of the international financial act which makes the international distribution of content out of Vancouver very, very cost appealing.”

As of March 31, 2015, B.C.’s film and television industry hit an estimated record $2 billion.

(The official figures have not yet been released but Creative BC has confirmed the industry’s production value hit $1.84 billion for the first 11 months of the fiscal year.)

Value of film and TV production in B.C.

2003 $1.4 billion

2004 $801 million

2005 $1.23 billion

2006 $1.23 billion

2007 $943 million

2008 $1.21 billion

2009 $1.32 billion

2010 $1.02 billion

April 1/11 – March 31/12 $1.34 billion

April 1/12 – March 31/13 $1.48 billion

April 1/13 – March 31/14 $1.45 billion

April 1/14 – March 31/15 $ 2 billion (estimated)

Source: Creative BC & BC Film Commission

Note: Year-end changed to March 31 as of 2012.
February 1, 2011. Vancouver, BC. Sean O’Reilly
Founder/C.E.O., Arcana Studio, has an animation/comic/graphic novel business. Here he is in his Burnaby Studio. Portrait for top 40 under 40. Photo: Laura Leyshon for the Globe and Mail